Yield10 Bioscience Inc (NASDAQ:YTEN), a USD$7.79M small-cap, is a chemicals company operating in an industry which is sensitive to changes in the business cycle, as it supplies materials for construction activities. Basic material analysts are forecasting for the entire industry, a strong double-digit growth of 27.56% in the upcoming year , and a whopping growth of 64.49% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. In this article, I’ll take you through the sector growth expectations, as well as evaluate whether YTEN is lagging or leading in the industry. Check out our latest analysis for Yield10 Bioscience
What’s the catalyst for YTEN’s sector growth?
Altogether the basic materials sector seems like it has reached maturity in its life cycle. Companies appear to be vastly competitive and consolidation seems to be a inevitable. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. In the previous year, the industry endured negative growth of -1.80%, underperforming the US market growth of 10.30%. YTEN lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means YTEN may be trading cheaper than its peers.
Is YTEN and the sector relatively cheap?
chemicals companies are typically trading at a PE of 26x, in-line with the US stock market PE of 22x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 14.58% compared to the market’s 10.06%, potentially illustrative of past tailwinds. Since YTEN’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge YTEN’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? YTEN recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto YTEN as part of your portfolio. However, if you’re relatively concentrated in chemicals, you may want to value YTEN based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If YTEN has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the chemicals industry. Before you make a decision on the stock, take a look at YTEN’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Yield10 Bioscience’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other basic materials stocks instead? Use our free playform to see my list of over 2000 other basic materials companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.