בס״ד

Are The Chemicals That are Killing You Produced by This Company? (ESI)

Posted on December 14, 2020

Element Solutions Inc. (NYSE:ESI) is a chemical company with great cash flow whose climb of late has come too far, too fast.

And that cash flow will be necessary to cover the company’s substantial debt.

Just last week, ESI shares jumped better than 7% on guidance, and we believe that’s set the stage for a top.

Background

Element Solutions makes chemicals that enhance the performance of a broad variety of communications equipment, mobile devices and electric vehicles.

So business has been strong during the ‘coronal flare’, as robust demand for electronics and communications infrastructure enhanced ESI’s bottom line.

But whether that justifies the stock’s price action of late is a separate issue.

Fundamentally speaking, the stock is overpriced according to traditional metrics, though not wildly so –

  • P/E is 33.7,
  • Dividend Yield is 1.24%,
  • Price to Book is 1.78.
  • Debt, as mentioned, presents a problem, with ESI’s Debt/Equity ratio standing at 0.68.  Strong cash flows will eventually pay long term debt, but as of this writing, coverage is wanting.

Have a look now at the daily chart –

With kind regards,

Hugh L. O’Haynew

 

Leave a Reply

Your email address will not be published. Required fields are marked *