Stock price when the opinion was issued
CHE.UN is up 30% YTD, yet remains cheap at 12X earnings. It is a cyclical company with a lot of debt, with a fairyl weak earnings history. But it has improved over the past year, and debt is lower than the very high levels seen in 2019 and 2020. It had to cut its dividend in half in 2020 and has only raised it slightly since. It is expected to show about 7% EPS growth next year. It offers a 5.92% yield currently. We will give it points for its improvement, but with slow growth and a leveraged balance sheet, in addition to its cyclicality, it is still not one of our favourites. Of note, the stock remains at 50% of the price it was more than 10 years ago.
Unlock Premium - Try 5i Free
Also pays a big, fat dividend, which sometimes you need to be cautious on. Drawing a linear regression line helps the chart make more sense, especially with a volatile stock. Linear regression helps you see through all the peaks and valleys. Stockcharts.com is a good place to go for this, as well as most of the discount brokers.
Very interesting company. Makes sulfuric acid, processes spent acids, produces inorganic coagulants for water treatment. A basic industry company, but one of the largest in NA in terms of asset production.
A lot of people are focusing on semiconductors, but when you make those chips the purity of the sulfuric acid is extremely high, and this company is an integral supplier. This gives it a good competitive advantage especially compared to European peers, as energy prices in Europe are quite high. Should have a good run going forward. Yield is 5.8%.
Looking at a 5-year chart, getting close to its 5-year high. Nice breakout above $10. If you take the height of the consolidation pattern (resistance was $10 - support of $7 = $3), and add it up again, you get ~$13, at least to start. That's what we're looking for over the shorter term. Then maybe it consolidates and may continue higher over the longer term.
This is a great company to be holding. Its main business lines are very, very stable. A very GDP type of growth, so it is not volatile. Because of this, the dividend is very secure. Made a sizable in-market acquisition last year and those synergies have yet to come through. You are earning 5% just waiting for the synergies to kick in.