METHANEX CORP (NASDAQ:MEOH) – A Potentially Undervalued Stock Worth Considering

METHANEX CORP (NASDAQ:MEOH) was identified as a decent value stock by our screener, which looks for companies with strong valuation metrics while maintaining solid fundamentals in profitability, financial health, and growth. The methanol producer stands out due to its attractive pricing relative to earnings and cash flow, along with stable operational performance.

Valuation Highlights

• Low P/E Ratio: MEOH trades at a P/E of 7.93, significantly below both the industry average (26.46) and the S&P 500 (27.30).
• Cheap Price-to-Cash Flow: The stock is priced cheaper than 96.5% of its peers based on free cash flow.
• Reasonable Forward P/E: At 9.49, the forward earnings multiple suggests the stock remains undervalued compared to broader market and sector averages.

Profitability Strengths

• Strong Margins: Operating margin of 12.17% and profit margin of 6.02% outperform most competitors.
• Healthy Returns: ROE of 9.92% and ROIC of 5.91% indicate efficient capital usage.
• Consistent Cash Flow: Positive operating cash flow in each of the past five years supports dividend sustainability.

Financial Health Considerations

• High Liquidity: Current ratio of 3.17 and quick ratio of 2.52 suggest strong short-term financial flexibility.
• Debt Concerns: A debt-to-equity ratio of 1.38 is above industry norms, though manageable given cash flow.
• Altman-Z Score: The score of 1.71 signals some financial risk but aligns with industry averages.

Growth Outlook

• Past EPS Growth: Earnings per share surged 144% in the past year, with a 5-year CAGR of 31.95%.
• Revenue Stability: Revenue growth has been modest (2.77% YoY) but is expected to accelerate to 7.97% annually.
• Dividend Track Record: A 2.25% yield with a 10-year payout history, though recent reductions warrant caution.

Our Decent Value Stocks screener lists more stocks with similar characteristics. For a deeper dive, review the full fundamental report on METHANEX.

Disclaimer

This is not investment advice. The observations here are based on available data at the time of writing, and investors should conduct their own research before making decisions.