Methanex Corporation’s MEOH stock looks promising at the moment. The company is benefiting from higher demand and pricing for methanol, aided by strong industry conditions. 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.
Methanex carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s take a look into the factors that make Methanex an attractive choice for investors right now.
Shares of Methanex have gained 26.2% over the past year against the 12.5% decline of its industry. It has also outperformed the S&P 500’s roughly 11.9% decline over the same period.
Image Source: Zacks Investment Research
Over the past two months, the Zacks Consensus Estimate for Methanex for 2022 has increased around 31%. The consensus estimate for second-quarter 2022 has also been revised 37% 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 2022 for Methanex is currently pegged at $7.90, reflecting an expected year-over-year growth of 31%. Earnings are also expected to register a 61.3% growth in second-quarter 2022.
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 4.04, cheaper compared with the industry average of 6.26.
Growth Drivers in Place
Methanex is gaining from healthy demand for methanol on the back of the ongoing economic recovery. The strong fundamentals of the methanol industry are driving its results. The company is seeing healthy demand for methanol from traditional chemical applications.
The company is also benefiting from an upswing in methanol pricing. Strong methanol demand coupled with ongoing industry supply challenges and high global energy prices is driving methanol prices. The company’s average realized price for methanol rose roughly 17% year over year in the first quarter of 2022. Higher demand and strong prices are driving its top line.
Methanex also remains committed to strengthen its balance sheet and maintain its strong liquidity position. It is well placed to maintain its business, execute attractive growth opportunities and continue the long track record of returning excess cash to shareholders through dividend payouts and share repurchases.
The Geismar 3 project is also expected to bolster the company's portfolio and support its future cash generation. The construction of the project is progressing according to plan and is on track to be completed on-time and within budget by late 2023 or early 2024.
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 Nutrien Ltd. NTR, Albemarle Corporation ALB and Cabot Corporation CBT.
Nutrien, sporting a Zacks Rank #1, has an expected earnings growth rate of 174.6% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 31% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has rallied roughly 41% in a year.
Albemarle has a projected earnings growth rate of 231.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 111.2% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. ALB has rallied roughly 35% in a year. The company flaunts a Zacks Rank #1.
Cabot, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 29.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 5.2% upward in the past 60 days.
Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 12% over a year.