Markets
KRA

5 Reasons to Add Kraton Corp (KRA) Stock to Your Portfolio

Kraton Corporation 's KRA stock looks promising at the moment. The chemical maker has seen its shares rise roughly 18.5% year to date. We are positive on the company's prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

What's Working in Favor of Kraton?

Solid Rank & VGM Score: Kraton currently has a Zacks Rank #1 (Strong Buy) and a Value Growth Momentum Score ( VGM Score ) of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.

Estimates Northbound: Annual estimates for Kraton have moved north over the past two months, reflecting analysts' confidence on the stock. Over this period, the Zacks Consensus Estimate for 2017 has increased by around 18.2% to $2.53 per share. The Zacks Consensus Estimate for 2018 has also moved up 5.4% over the same timeframe to $3.52.

An Outperformer: Kraton has outperformed the industry it belongs to over the past six months. The company's shares have gained around 24% over this period, compared with roughly 1.6% decline recorded by the industry.

Attractive Valuation: Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Kraton is currently trading at trailing 12-month EV/EBITDA multiple of 7.44, cheaper compared with the industry average of 23.89.

Growth Drivers: Kraton sees a more favorable raw material pricing environment on a year over year comparison basis and positive underlying business momentum for the remainder of 2017. The company remains committed to steer organic growth in key markets through state-of-the-art innovation and infrastructure.

Kraton, in May, announced the opening of a hydrogenated styrenic block copolymer (HSBC) plant in Mailiao, Taiwan. The plant will boost the company's innovation-grade business, especially low molecular weight HSBC products. It will also help Kraton to effectively serve the growing export and Asian markets through higher production capacity of varied grades of HSBC products.

Kraton is also benefiting from the acquisition of Arizona Chemical in the form of cost reduction and operational improvements. The company delivered cost improvement and synergies worth $26 million in the first half of 2017. Kraton expects to realize transaction synergies of $65 million related to the Arizona Chemical acquisition by the end of this year.

Kraton should also gain from its efforts to reduce debt. The company plans to cut net debt by $100-$150 million in 2017.

Kraton Corporation Price and Consensus

Kraton Corporation Price and Consensus | Kraton Corporation Quote

Other Stocks to Consider

Other well-placed companies in the basic materials space include Kronos Worldwide, Inc. KRO , The Chemours Company CC and BASF SE BASFY , all sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Kronos has an expected long-term earnings growth of 5%.

Chemours has an expected earnings growth of 15.5% for the current year.

BASF has an expected long-term earnings growth of 8.6%.

Zacks' 10-Minute Stock-Picking Secret

Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.

But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.

Learn the secret >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BASF SE (BASFY): Free Stock Analysis Report

Kronos Worldwide Inc (KRO): Free Stock Analysis Report

Chemours Company (The) (CC): Free Stock Analysis Report

Kraton Corporation (KRA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

KRA KRO CC BASFY

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More