Now trading at a price of $50.01, Dow has moved -2.2% so far today.
Dow returned gains of 13.0% last year, with its stock price reaching a high of $60.88 and a low of $42.91. Over the same period, the stock underperformed the S&P 500 index by -2.0%. As of April 2023, the company's 50-day average price was $53.7. 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. Based in Midland, MI, the large-cap Industrials company has 37,800 full time employees. Dow has offered a 5.5% dividend yield over the last 12 months.
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.
Dow's Valuation Is in Line With Its Sector Averages:
Dow has a trailing twelve month P/E ratio of 21.9, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of $3.83, the company has a forward P/E ratio of 14.0. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 4 years of reported EPS is 23.7%. On this basis, Dow's PEG ratio is 0.93. Using instead the 10.5% weighted average of Dow's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 2.09, which suggests that its shares may be overpriced. In contrast, the market is likely undervaluing Dow in terms of its equity because its P/B ratio is 1.76 while the sector average is 3.78. The company's shares are currently trading -22.4% below their Graham number.
Dow Has an Analyst Consensus of Some Upside Potential:
The 19 analysts following Dow have set target prices ranging from $47.0 to $66.0 per share, for an average of $55.58 with a hold rating. As of April 2023, the company is trading -3.4% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Dow has a very low short interest because 1.7% of the company's shares are sold short. Institutions own 65.7% of the company's shares, and the insider ownership rate stands at 0.12%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $3,092,503,673.
