Daily Stock Pick: October 5th, 2021

Stocks were looking to bounce back this morning after selling off in the previous session.  Tech shares took a hit yesterday, sending the Nasdaq plummeting to close 2.14% lower.  The S&P 500 lost 1.3%, and the Dow closed with a loss of 0.94%.  Tech shares were mostly green, and stocks tied to the reopening were also higher in early trading this morning. 

Today we’re highlighting a blue-chip stock that’s down nearly 20% since May.  Many consider this stock a portfolio staple.  If you’re not in on this one, now may be an opportune time to pick up some shares.  

Dow Inc. (DOW) has received much attention for its wild price movement in recent months, increasing to $70 in May and then sinking to $55.53 in late September. 

Dow is a world leader in essential chemicals like polyurethanes, and demand for Dow’s products is soaring, despite increasing prices in recent months.  In July, Dow reported its best-ever quarter in history.  Sales were up 66% year over year.  EPS was up to $2.51 per share versus a loss of $0.31 in Q2 2020.  The company’s debt was down by $1.1 billion with no significant debt maturing before late 2025 and reported free cash of $1.7 billion. Yet the stock has lost nearly 10% over the past 3 months. 

Dow’s momentum in earnings and cash flow seems here to stay as activity in key end markets like manufacturing, construction, automotive, and personal care pick up.  Notably, the company hasn’t missed one single dividend payment since 1912 — that’s 109 years and counting.  The company’s dividend has grown at a rate of 4.5% over the past four years.  Investors currently benefit from a solid 4.86% dividend.  

Analysts expect the stock’s EPS to improve 413.3% year-over-year to $8.52 in the current year. The consensus revenue estimate of $52.87 billion for the current year indicates a 37.2% rise from the prior year period.  DOW surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock appears to be a bargain against the chemical industry.   Dow’s Price/Earnings ratio of 10.8x is below its peer average of 22.76x.   Regarding forward Price/Sales, DOW is currently trading at 0.83x, 40% lower than the industry average of 1.39x.

The 21 analysts offering 12-month price forecasts for Dow Inc. have a median 12-month price target of $69, representing an 18.5% increase from the current price.  There’s plenty of reasons to add this evergreen to your watchlist and even possibly strike up a position.  

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