OMNOVA Solutions (OMN) trades at one of the lowest valuations in the specialty chemicals space, not having participated in the recent rally many companies saw but still showing exposure to domestic housing, says Daniel Rizzo, Analyst at Sidoti & Company, LLC.
“[A] company I like a lot is OMNOVA Solutions. This is more of a valuation; it’s probably the cheapest name in my sector, trading at less than 10 times estimate — didn’t really enjoy the run-up that a lot of other chemical companies did. They have heavy exposure, or just a decent exposure, to housing, to their laminate and their cabinet end markets,” Rizzo said.
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Rizzo says OMNOVA has seen stable input costs for its chemicals for the last couple quarters, and he expects the company to see increased revenue in the second half of 2013.
“They make a chemical that uses corporate backing and they make laminates for cabinets, and I think that’s going to help fuel revenues, and as I said, one of the things that’s killed them in the past is raw material costs, particularly butadiene. Those costs have been benign for about six months now; don’t see that really going up, so I think they could really do well when things start to tick up at the second half of the year,” Rizzo said.
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