OMNOVA Solutions, Inc. – Value Analysis (NYSE:OMN) : August 19, 2017

Capitalcube gives OMNOVA Solutions, Inc. a score of 16.

Our analysis is based on comparing OMNOVA Solutions, Inc. with the following peers – PPG Industries, Inc., RPM International Inc., Trinseo SA, Ferro Corporation, Dow Chemical Company, PolyOne Corporation, Methanex Corporation, Celanese Corporation Class A and Masco Corporation (PPG-US, RPM-US, TSE-US, FOE-US, DOW-US, POL-US, MX-CA, CE-US and MAS-US).

Investment Outlook

OMNOVA Solutions, Inc. has a fundamental score of 16 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (3.43) than its peer median (4.55).
  • OMN-US‘s EBITDA-based price multiple implies slower growth than its peers despite its current comparatively high EBITDA-based returns.
  • OMN-US has relatively low profit margins and median asset efficiency.
  • 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.
  • OMN-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • OMN-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 Price/EBITDA 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.
  • OMN-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

OMN-US is debt-constrained.

  • With debt at a relatively high 52.62% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 26.42%), and interest coverage level of 2.27x, OMN-US seems debt-constrained.
  • All 9 peers for the company have an outstanding debt balance.

OMN-US has maintained its relatively high leverage profile from the recent year-end.

  • OMN-US‘s interest coverage is its highest relative to the last five years and compares to a low of 1.38x in 2014.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (2.27x) and the peer median (5.13x).
  • OMN-US‘s debt-EV has increased 2.08 percentage points from last year’s low but is still below its five-year average debt-EV of 60.96.
  • While its debt-EV increased to 52.62% from 50.53% (in 2016), its peer median decreased during this period to 26.42% from 27.98%.
  • Relative to peers, debt-EV rose 3.64 percentage points.

Access the detailed analysis for OMNOVA Solutions, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
PPG Industries, Inc. 14.75 1.61 15.62 48.68
RPM International Inc. 23.5 1.94 5.42 29.76
Trinseo SA 31.5 2.88 5.08 39.93
Ferro Corporation 31.16 2.56 5.18 17.46
Dow Chemical Company 22.97 1.93 5.76 31.48
PolyOne Corporation 31.98 2.08 5.07 21.82
Methanex Corporation 29.35 1.73 3.63 37.41
Celanese Corporation Class A 20.37 1.81 7.18 29.97
Masco Corporation 21.72 1.95 3.88 31.2
OMNOVA Solutions Inc. 52.62 2.27 2.27 13.98
Peer Median 26.42 1.95 5.13 30.59
Best In Class 14.75 2.88 15.62 48.68

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Company Profile

OMNOVA Solutions, Inc. develops, manufactures, markets emulsion polymers, specialty chemicals and decorative products. It provides engineered surfaces for various commercial, industrial and residential end uses. The firm operates its business through the Performance Chemicals and Engineered Surfaces segments. The Performance Chemicals segment produces a broad range of emulsion polymers and specialty chemicals based primarily on styrene butadiene, styrene butadiene acrylonitrile, styrene butadiene vinyl pyridine, nitrile butadiene, polyvinyl acetate, acrylic, styrene, vinyl acrylic, glyoxal, phenolic, diphenylamine antioxidants, hollow plastic pigment, fluorochemicals and bio-based chemistries. The Engineered Surfaces segment develops designs, produces and markets a broad line of functional and decorative surfacing products, including coated fabrics, vinyl, paper and specialty laminates and performance films. The company was founded in 1999 and is headquartered in Beachwood, OH.

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