Arch Chemicals Inc. - Value

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Can the specialty chemical companies keep up their red hot pace?
Arch Chemicals Inc.
(
ARJ
) has surprised on the Zacks Consensus the last 6 quarters, including the last 4 by an average of 532%. Shares have broken out but Arch is still a value stock with a forward P/E of 14.6.

This Zacks #1 Rank (strong buy) produces chemicals that destroy and control the growth of harmful microbes. It has two segments: Biocides Products and Performance Products. The Biocides segment is the largest segment.

The company focuses on water treatment including sanitizers and chemicals that destroy microbes in pools and spas, drinking water and water used in industrial and commercial uses such as bottle cleaning operations.

Arch Had Record Earnings in 2010

On Feb 3, Arch reported fourth quarter results and blew by the Zacks Consensus Estimate by 1900%. Earnings per share were 20 cents compared to the consensus of just 1 cent. The company earned 12 cents in the year ago quarter.

Sales rose to $311.7 million from $293.4 million last year. The gains were due to higher sales from innovative products and emerging markets.

Its largest segment, Biocides, saw sales rise 5.4% to $263.9 million.

Zacks Consensus Estimates Rise

All signs point to another strong year in 2011. In February, Arch projected sales to rise between 5% to 7% for 2011 due to strong growth from the Biocides business.

The 2011 Zacks Consensus Estimate has jumped to $2.85 from $2.60 in the last 2 months. That is earnings growth of 7%.

Analysts are also bullish on 2012, as the Zacks Consensus climbed to $3.02 from $2.77 in the prior 60 days.

The company has an attractive 5-year price-to-consensus chart with the consensus estimates steadily climbing over the last few years.

Shares Near 52-Week High But Still a Value

Since the earnings announcement in February, shares have broken out to new 52-week highs.

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However, the stock still has attractive valuations.

While its P/E is just within the range of what I call a "value" stock, at just under 15x, its price-to-book ratio is 2.4. That is well within the value parameters of under 3.0.

It also has a cheap price-to-sales ratio of 0.8. A P/S ratio under 1.0 usually indicates value.

Check out the 1-year chart.

Rewarding Shareholders

Arch Chemicals pays a dividend which currently yields a healthy 1.9%.

It also has a solid return on equity (ROE) of 16.1%.

Arch is scheduled to report first-quarter earnings on May 5.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.


 
ARCH CHEMICALS (ARJ): Free Stock Analysis Report
 
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