Required knowledge for Dow (DOW) Investors

Today we're going to take a closer look at large-cap Industrials company Dow, whose shares are currently trading at $54.77. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!

Dow's Valuation Is in Line With Its Sector Averages:

Dow Inc., through its subsidiaries, engages in the provision of various materials science solutions for packaging, infrastructure, mobility, and consumer applications in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Dow has a trailing 12 month P/E ratio of 22.1 and a P/B ratio of 1.93.

When we divide Dow's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -3.08. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

The Company Enjoys Exceptional EPS Growth:

2020-02-07 2021-02-05 2022-02-04 2023-02-01
Revenue (MM) $42,951 $38,542 $54,968 $56,902
Gross Margins 15.0% 13.0% 20.0% 15.0%
Operating Margins 8% 7% 14% 10%
Net Margins -3.0% 3.0% 11.0% 8.0%
Net Income (MM) -$1,359 $1,225 $6,311 $4,582
Net Interest Expense (MM) -$852 -$789 -$676 -$489
Depreciation & Amort. (MM) -$2,938 -$2,874 -$2,842 -$2,758
Earnings Per Share -$1.83 $1.65 $8.41 $6.31
EPS Growth n/a 190.16% 409.7% -24.97%
Diluted Shares (MM) 742 742 750 726
Free Cash Flow (MM) $7,967 $7,520 $8,793 $9,532
Capital Expenditures (MM) -$2,037 -$1,257 -$1,593 -$2,013
Net Current Assets (MM) -$29,615 -$29,381 -$21,358 -$17,290
Long Term Debt (MM) $15,975 $16,491 $14,280 $14,698
Net Debt / EBITDA 2.27 2.21 1.09 1.36

Dow has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and a decent current ratio. We also note that the company benefits from exceptional EPS growth and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a positive growth rate.

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.