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Here's Why You Should Buy Methanex (MEOH) Stock Right Now

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Methanex Corporation’s MEOH stock looks promising at the moment. The company’s shares have popped roughly 42% over the past three months. We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

Let’s delve deeper into the factors that make this Zacks Rank #1 (Strong Buy) stock an attractive choice for investors right now.

Price Performance

Shares of Methanex have surged 92.9% over the past year against the 23.5% rise of its industry. It has also outperformed the S&P 500’s roughly 32.6% rise over the same period.

Zacks Investment Research
Zacks Investment Research

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Estimates Northbound

Over the past two months, the Zacks Consensus Estimate for Methanex for 2021 has increased around 36.8%. The consensus estimate for third-quarter 2021 has also been revised 25.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Solid Growth Prospects

The Zacks Consensus Estimate for earnings for 2021 for Methanex is currently pegged at $5.17, reflecting an expected year-over-year growth of 419.1%. Moreover, earnings are expected to register 219.4% growth in third-quarter 2021.

Valuation Looks Attractive

Methanex’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Methanex is currently trading at trailing 12-month EV/EBITDA multiple of 8.34, cheaper compared with the industry average of 10.26.

Growth Drivers in Place

Methanex is gaining from healthy demand for methanol on the back of the ongoing economic recovery. Global methanol demand increased around 3% in the second quarter sequentially, and the company anticipates demand to surpass pre-pandemic level later this year. It is also benefiting from an improvement in methanol pricing. Strong methanol demand coupled with ongoing industry supply challenges is driving methanol prices. Higher demand and robust prices led to considerable increases in the company's top line in the last reported quarter.

The company also remains committed to strengthen its balance sheet and maintain its strong liquidity position. It recently announced a new 5% share buyback program. Its strong financial position and a favorable methanol price environment enables it to generate significant cash flow to maintain its business, fund the remaining capital costs for the Geismar 3 project as well as return excess cash to shareholders. The Geismar 3 project is expected to bolster its portfolio and support its future cash generation.

Methanex Corporation Price and Consensus

Methanex Corporation Price and Consensus
Methanex Corporation Price and Consensus

Methanex Corporation price-consensus-chart | Methanex Corporation Quote

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, Nutrien Ltd. NTR and AdvanSix Inc. ASIX, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has a projected earnings growth rate of 534.4% for the current year. The company’s shares have surged around 129% in a year.

Nutrien has an expected earnings growth rate of 173.9% for the current year. The stock has also rallied around 68% over a year.

AdvanSix has a projected earnings growth rate of 160.4% for the current year. The company’s shares have shot up around 212% in a year.


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