Chase Corp. – Value Analysis (NYSE MKT:CCF) : June 29, 2017

Capitalcube gives Chase Corp. a score of 84.

Our analysis is based on comparing Chase Corp. with the following peers – H.B. Fuller Company, Quaker Chemical Corporation, PPG Industries, Inc., RPM International Inc., Sherwin-Williams Company, Bemis Company, Inc., 3M Company and AZZ Inc. (FUL-US, KWR-US, PPG-US, RPM-US, SHW-US, BMS-US, MMM-US and AZZ-US).

Investment Outlook

Chase Corp. has a fundamental score of 84 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It’s current Price/Book of 5.47 is about median in its peer group.
  • CCF-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • CCF-US has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • CCF-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While CCF-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • CCF-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

CCF-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 2.98% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 14.72%), and a well-cushioned interest coverage level of 50.44x, CCF-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 8 peers for the company have an outstanding debt balance.

CCF-US has maintained its Quick & Able profile from the recent year-end.

  • CCF-US‘s interest coverage is its highest relative to the last five years and compares to a low of 20.70x in 2013.
  • While its interest coverage increased to 50.44x from 46.63x (in 2016), its peer median decreased during this period to 11.89x from 14.41x.
  • Interest coverage rose 6.33 points relative to peers.
  • CCF-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 34.52% in 2012.
  • The decrease in its debt-EV to 2.98% from 7.65% (in 2016) was also accompanied by a decrease in its peer median during this period to 14.72% from 15.22%.
  • Relative to peers, debt-EV fell 4.16 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
H.B. Fuller Company 25.3 2.56 6.28 27.65
Quaker Chemical Corporation 3.82 2.84 32.43 127.45
PPG Industries, Inc. 14.72 1.56 15.97 34.29
RPM International Inc. 22.5 1.69 5.79 30.27
Sherwin-Williams Company 6.55 1.32 11.89 78.45
Bemis Company, Inc. 25.9 1.91 6.57 28.2
3M Company 9.47 1.99 22.13 56.58
AZZ Inc. 15.22 2.09 7.22 42.42
Chase Corporation 2.98 5.03 50.44 144.69
Peer Median 14.72 1.99 11.89 42.42
Best In Class 2.98 5.03 50.44 144.69

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Company Profile

Chase Corp. is a global manufacturer of protective materials. It operates through the Industrial Materials and Construction Materials segments. The Industrial Materials segment offers specialty tapes and related products for the electronic and telecommunications industries, insulating and conducting materials, laminated papers, water-blocking compound, protective conformal coatings, laminated film foils pulling and detection tapes, and cover tapes. The Construction Materials segment offers protective pipe coating tapes and other protectants for valves, regulators, casings, joints, metals, concrete and wood; polymer additive, waterproofing, specialized coating and lining systems for liquid storage and containment applications. The company was founded by Francis G. Chase, Francis M. Chase and Edward L. Chase in 1946 and is headquartered in Bridgewater, MA.

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