Chemical & Mining Company of Chile (
) is ideal for value investing. The business is expected to profit
increased demand for lithium batteries
overall growth in Latin America
[caption id="attachment_70189" align="alignright" width="300"
caption="Plant in Nueva Victoria, Chile"]
With a profit margin of 27.05%, Chemical & Mining compares
very favorably with such heavyweights as Dow Chemical Company (
), with a profit margin of only 3.84%.
In value investing everything flows from profits. If a company
does not make money, eventually it will go out of business (at
least, it should). As legendary investment banker André Meyer
noted, it is unheard-of for a profitable company to go broke.
Chemical & Mining's high profit margin leads to many other
appealing financial data points for the purposes of value
investing. The return on equity is 31.65%, compared with about 15%
for the average member of the Standard & Poor's 500 Index. ROE
is a very important measure, as it reveals what investors are
earning from their equity in a company.
The return on assets for Chemical & Mining is 15.68%.
By contrast, Dow Chemical's ROA is only 3.27%. The Chilean
company's operating margin of 35.87% is also superior.
Earnings-per-share growth is in a very bullish trend for
Chemical & Mining. Over the past five years it has averaged
15.52%. On a quarterly basis, it is up by 35.71%. It is even better
for the year, up 42.82%. That's a very positive trend for value
Now trading at about $59.50 a share, Chemical & Mining has a
mean analyst target price for the next year of $62.81. The dividend
yield of 1.72% adds to that: with the high profit margin, there is
plenty of cash to raise the dividend. Also bullish is the
below-average beta, which studies have shown results in higher
return, not to mention the low short float of just 0.47%.
The trend is positive for shareholders, with SQM trading above
the 20-, 50- and 200-day moving averages.