Cabot Corp. – Value Analysis (NYSE:CBT) : April 17, 2017

Capitalcube gives Cabot Corp. a score of 50.

Our analysis is based on comparing Cabot Corp. with the following peers – W. R. Grace & Co., Koppers Holdings Inc., Dow Chemical Company, Exxon Mobil Corporation, Corning Inc and Aspen Aerogels Inc (GRA-US, KOP-US, DOW-US, XOM-US, GLW-US and ASPN-US).

Investment Outlook

Cabot Corp. has a fundamental score of 50 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It’s current Price/Book of 2.72 is about median in its peer group.
  • The market expects CBT-US to grow more slowly than its peers and for its median ROE to decline.
  • CBT-US has a successful operating model with relatively high net profit margins and asset turns.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • Over the last five years, CBT-US‘s return on assets has improved from below median to better than the median among its peers, suggesting that the company has improved its relative operations markedly.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • CBT-US‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • CBT-US has additional debt capacity.

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Leverage & Liquidity

CBT-US has additional debt capacity.

  • With debt at a reasonable 23.07% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 23.07%), and a well-cushioned interest coverage level of 5.96x, CBT-US has the capacity to borrow some more.
  • All 6 peers for the company have an outstanding debt balance.

CBT-US has maintained its relatively high liquidity profile from the recent year-end.

  • CBT-US‘s interest coverage is upward trending and is now similar to its five-year average interest coverage of 5.73x.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (5.96x) and the peer median (3.65x).
  • CBT-US‘s debt-EV has increased 0.55 percentage points from last year’s low but is still below its five-year average debt-EV of 29.90.
  • The increase in its debt-EV to 23.07% from 22.53% (in 2016) was also accompanied by an increase in its peer median during this period to 23.07% from 22.53%.

Access the detailed analysis for Cabot Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
W. R. Grace & Co. 25.94 1.36 3.42 14.42
Koppers Holdings Inc. 44.8 1.49 2.06 14
Dow Chemical Company 25.04 1.88 5.4 24.5
Exxon Mobil Corporation 10.18 0.87 3.65 58.17
Corning Inc 16.95 3.29 9.08 54.93
Aspen Aerogels Inc 0.05 2.77 -13.97 5204.11
Cabot Corporation 23.07 2.52 5.96 39.42
Peer Median 23.07 1.88 3.65 39.42
Best In Class 0.05 3.29 9.08 5204.11

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Company Profile

Cabot Corp. manufactures and supplies organic chemicals. It operates through the following segments: Reinforcement Materials, Performance Materials, Purification Solutions, and Specialty Fluids. The Reinforcement Materials segment produces rubber blacks that are used on tires, hoses, belts, and molded goods. The Performance Materials segment sells specialty additives that enable performance in: plastics, wire and cable, toners, coatings, adhesives and sealants, electronics, batteries, inks, inkjet printing, composites, silicones, building construction materials, and industrial insulation. The Purification Solutions segment manufactures activated carbon for purification of: air and water, food and beverages, pharmaceuticals, and catalysts. The Specialty Fluids segment formulates advanced cesium products for use in: oil and gas well drilling and completion fluids; catalysts; titanium dioxide; glass; and automotive brazing fluids. The company was founded by Godfrey Lowell Cabot in 1882 and is headquartered in Boston, MA.

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