PolyOne Corporation - Value


The global specialty chemical makers had a hot 2011. PolyOne Corporation ( POL ) saw double digit earnings growth in 2011 and analysts expect more of the same in 2012 despite headwinds in Europe. This Zacks #2 Rank (Buy) is still a value stock with a forward P/E of just 13.2.

PolyOne manufactures specialized polymer materials which are found in just about every industry from transportation, to colors used in packaging, to electronics and healthcare.

It provides services in natural rubber latex compounds, color additives, as well as screen printing inks and dyes, to name a few.

PolyOne Beat by 28.6% in the Fourth Quarter

On Feb 17, PolyOne reported its fourth quarter and full year results and surprised on the Zacks Consensus Estimate by 4 cents. Earnings were 18 cents per share compared to the consensus of 14 cents.

Revenue rose 4% to $640.4 million from $617.8 million in the year ago quarter. For the full year, revenue jumped 9% to $2.9 billion from $2.6 billion in 2010.

The good news was spread throughout. The Specialty Platform and PolyOne Distribution segments saw record levels of operating income for the year, while Performance Products and Solutions hit a new record return on sales of 7.2%.

The company also completed its acquisition of ColorMatrix Group, a manufacturer of specialty additives, liquid colorant and dosing technologies on Dec 21, 2011.

The ColorMatrix acquisition is expected to boost the bottom line in 2012. The company raised its accretion guidance for 2012. ColorMatrix is now expected to add income of 4 to 6 cents per share in 2012. This is up from its prior guidance of just 2 to 3 cents.

Double Digit EPS Growth Expected to Continue in 2012

After growing earnings 29% in 2011 to a record $1.02, PolyOne is expecting another record earnings year in 2012. But it also sounded a word of caution.

"Looking at 2012, we expect another year of record adjusted earnings per share. However, growth rates may decelerate given the current economic environment." said Stephen D. Newlin, CEO.

"While a slowdown in the European economy and a weaker Euro pose near term headwinds, we remain extremely optimistic about our medium to long-term growth prospects," he added.

Since the earnings report, 2 estimates out of 7 have moved higher for 2012. The Zacks Consensus Estimate is now calling for $1.12 per share, which is earnings growth of 10.2%.

Still Lots of Value

Although shares have rallied in 2012, PolyOne is still a value stock.

In addition to a P/E under 15, which is what I use to gauge "value", PolyOne has a price-to-book ratio of 2.3. A P/B under 3.0 can mean a company has value.

Another good indicator of value is the price-to-sales ratio. A P/S under 1.0 can indicate a company is undervalued. PolyOne's P/S is just 0.5.

The company has other solid fundamentals as well. It has a 1-year return on equity (ROE) of 16.4%. This is well above the average of the S&P 500 of 13.4%.

PolyOne has also been rewarding its shareholders. On Feb 14, the company announced it was raising the dividend 25% to 5 cents per share. That is a yield of 1.4%.

Investors in PolyOne get both the global growth story, even if it's decelerating, and solid value fundamentals. They also get a larger dividend to boot.

This Week's Value Zacks Rank Buy Stocks

Automobile retailers continue to see improvement as the American consumer comes out of its deep freeze. Asbury Automotive Group, Inc. ( ABG ) grew earnings by the double digits in 2011 and is expected to again in 2012. This Zacks #1 Rank (Strong Buy) is also a value stock, with a forward P/E of 12.2. Read the full article.

Drilling is hotter than ever. Oil States International, Inc. ( OIS ) is expected to grow earnings by the double digits for the third consecutive year in 2012 as demand in the energy sector kicks into high gear. Yet this Zacks #1 Rank (Strong Buy) is also cheap. It is trading with a forward P/E of just 11.8. Read the full article.

Who says that the American consumer isn't spending? Cabela's, Inc. ( CAB ) just reported strong fourth quarter results and announced it would open a bunch of new stores. This Zacks #1 Rank (Strong Buy) is also still a value stock with a forward P/E of 13.4. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com . She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec .

POLYONE CORP ( POL ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: POL



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