Why You Should Add Ingevity (NGVT) Stock to Your Portfolio
Ingevity Corporation’s NGVT stock looks promising at the moment. It is benefiting from higher demand and prices in its industrial specialties and engineered polymers businesses.
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 is poised to carry the momentum ahead.
Let's see what makes this Zacks Rank #2 (Buy) stock an attractive investment option at the moment.
Estimates Northbound
Over the past month, the Zacks Consensus Estimate for Ingevity for the current year has increased around 2%. The consensus estimate for 2023 has also been revised around 1% upward over the same time frame.
Positive Earnings Surprise History
Ingevity has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 15.8%, on average.
Attractive Valuation
Valuation looks attractive as Ingevity’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, Ingevity is currently trading at trailing 12-month EV/EBITDA multiple of 7.04, cheaper compared with the industry average of 21.22.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Ingevity is 31.4%, above the industry’s level of 19.1%.
Upbeat Prospects
Ingevity is seeing continued recovery in demand for its industrial specialties products from the pandemic-induced slowdown, which is leading to higher volumes and prices. The company benefited from higher volumes in the Performance Chemicals segment as well as higher selling prices in engineered polymers and industrial specialties in the fourth quarter of 2021.
In the Performance Chemicals division, the company witnessed double-digit growth in a majority of its markets and continued to grow demand for higher-value derivatized products in all three businesses in the fourth quarter. It expects revenues for Performance Chemicals to outpace ongoing energy, logistics and raw materials inflation in 2022. The company’s Performance Materials segment is also expected to benefit from the normalization of microchip supplies and an uptick in automotive production.
Ingevity is also taking a number of actions to drive long-term growth. It remains committed to invest organically. It expects to bring additional alternative fatty acid capacity at its Crossett facility online in second-quarter 2022, which will support more substantial future sales growth. The company is also looking to bring its new polyol capability at the DeRidder plant onstream in the middle of 2022. It is also working on a number of debottlenecking projects at its performance materials facilities.
The company remains focused on optimizing its operations and inventory to provide outstanding service to customers. It is also taking price hike actions to mitigate cost inflation. Ingevity is also committed to capturing the maximum value for its products.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nutrien Ltd. NTR, AdvanSix Inc. ASIX and Commercial Metals Company CMC.
Nutrien, sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 106.4% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 37.8% 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 missing once. It has a trailing four-quarter earnings surprise of roughly 60.3%, on average. NTR has rallied around 91% in a year.
AdvanSix, carrying a Zacks Rank #1, has an expected earnings growth rate of 64.9% for the current year. ASIX's consensus estimate for current-year earnings has been revised 53% upward in the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 83% in a year.
Commercial Metals, carrying a Zacks Rank #1, has a projected earnings growth rate of 114.7% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised 35.1% upward over the past 60 days.
Commercial Metals 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 13.7%, on average. CMC has gained around 35% in a year.
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