Olin (OLN) Shares Climb 1.6% Today - It's Time for a Value Analysis

Shares of Olin (OLN) jumped 1.6 % during today's afternoon session, bringing their 52 week performance to None%. The stock seems to be overvalued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's strong growth indicators and mixed market sentiment.

Olin Corporation manufactures and distributes chemical products in the United States, Europe, and internationally. The mid-cap Basic Materials company is based in Clayton, United States and has 7,750 full time employees.

OLN Has a Higher P/E Ratio Than the Sector Average

Compared to the Basic Materials sector's average of 8.57, Olin has a trailing twelve month price to earnings (P/E) ratio of -13.8 and an expected P/E ratio of 10.8. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $-4.09 or forward earnings per share of $5.22.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Olin's P/E ratio is higher than its sector average of 8.57, we can deduce that the market is overvaluing the company's earnings.

Olin Is Overvalued in Terms of Expected Growth

Olin's PEG ratio is 3.77. This metric represents the company's earnings per share divided by its expected growth ratio, and is a useful complement to the price to earnings analysis, because it factors in growth to the valuation. A PEG ratio around or below 1 implies that the market in fairly valuing the company in terms of its growth estimates. But when the PEG ratio is higher, as in Olin's case, it tells us the company is overvalued.

OLN Has an Alarming P/B Ratio

The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.

Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Olin's P/B ratio of 5.3 is higher than its sector average of 1.86, such a margin of safety does not exist for the stock.

Olin's Is a Profitable Business

If you are looking to make OLN a long term investment, it's essential that you understand the viability of its business through a study of its margins. Gross margins tell you how much the company makes in profit when only the costs directly related to producing the goods or delivering the service are taken into account. Operating margins, on the other hand, factor in overhead costs so they tell you how effectively Olin is run.

Olin's Gross Margins

Date Reported Revenue ($ MM) Cost of Revenue ($ MM) Gross Margins (%) YoY Growth (%)
2021-12-31 8,911 6,616 25.75 286.64
2020-12-31 5,758 5,375 6.66 -39.34
2019-12-31 6,110 5,439 10.98 n/a

Olin's Operating Margins

Date Reported Total Revenue ($ MM) Operating Expenses ($ MM) Operating Margins (%) YoY Growth (%)
2021-12-31 8,911 417 21.07 3341.54
2020-12-31 5,758 421 -0.65 -115.62
2019-12-31 6,110 416 4.16 n/a

Olin's cost of revenue is growing at a rate of 11.0% in contrast to 0.1% for operating expenses. Sales revenues, on the other hand, have experienced a 24.5% growth rate. As a result, the average gross margins growth is 123.6 and the average operating margins growth rate is 1613.0, with coefficients of variability of 69.2% and 139.2% respectively.

We See Mixed Market Signals Regarding OLN

Olin has an average rating of buy and target prices ranging from $93 to $45. At its current price of $56.28, the company is trading -8.31% away from its target price of $61.38. 4.1% of the company's shares are linked to short positions, and 90.4% of the shares are owned by institutional investors.

Holder Shares Date Reported Percentage Value
Vanguard Group, Inc. (The) 15,893,166 2022-06-29 11% $735,535,722
Blackrock Inc. 15,592,103 2022-06-29 11% $721,602,526
Sachem Head Capital Management, LP 9,450,000 2022-06-29 7% $437,346,000
FMR, LLC 7,346,926 2022-06-29 5% $340,015,735
State Street Corporation 5,479,030 2022-06-29 4% $253,569,508
Dimensional Fund Advisors LP 4,913,428 2022-06-29 3% $227,393,447
Hotchkis & Wiley Capital Management, LLC 4,251,850 2022-06-29 3% $196,775,618
Invesco Ltd. 4,222,523 2022-06-29 3% $195,418,364
Boston Partners 3,910,392 2022-06-29 3% $180,972,941
Fuller & Thaler Asset Management Inc. 3,215,279 2022-06-29 2% $148,803,112
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.