By Rob Otman
The Dow Chemical Company (NYSE: DOW) is a $78 billion company today. Investors that bought shares one year ago are sitting on a 22.06% total return. That’s above the S&P 500’s return of 16.3%.
Dow Chemical stock is beating the market, but does that make it a good buy today? To answer this question we’ve turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
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Earnings-per-Share (EPS) Growth: Dow Chemical reported a recent EPS growth rate of 393.33%. That’s above the chemicals industry average of 59.7%. That’s a great sign. Dow Chemical’s earnings growth is outpacing competitors.
Price-to-Earnings (P/E): The average price-to-earnings ratio of the chemicals industry is 21.25. And Dow Chemical’s ratio comes in at 17.76. It’s trading at a better value than many of its competitors.
Debt-to-Equity: The debt-to-equity ratio for Dow Chemical stock is 78.46. That’s above the chemicals industry average of 57.66. That’s not a good sign. Dow Chemical’s debt levels should be lower.
Free Cash Flow per Share Growth: Dow Chemical’s FCF has been lower than its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
Profit Margins: The profit margin of Dow Chemical comes in at 6.71% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Dow Chemical’s profit margin is below the chemicals average of 15.15%. So that’s a negative indicator for investors.
Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Dow Chemical is 16.72%, and that’s below its industry average ROE of 22.65%.
Dow Chemical stock passes two of our six key metrics today. That’s why our Investment U Stock Grader rates it as a hold with caution.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.
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Source:: Investment You
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