Stepan Chemical is a major manufacturer of specialty and intermediate chemicals used in a broad range of industries. Stepan is a leading merchant producer of surfactants, which are the key ingredients in consumer and industrial cleaning compounds. The Company is also a leading supplier of Polyurethane polyols used in the expanding thermal insulation market, and C.A.S.E. (Coatings, Adhesives, Sealants, and Elastomers) industries. The company was founded in 1932 and is based in Northfield, Illinois.
SCL Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Stepan Co with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Stepan Co ranked in the 45th percentile in terms of potential gain offered. We should note, though, that the most conservative analysis suggests this stock will yield negative results -- and thus may be a potential short opportunity. The most interesting components of our discounted cash flow analysis for Stepan Co ended up being:
The company's debt burden, as measured by earnings divided by interest payments, is 25.56; that's higher than 89.8% of US stocks in the Basic Materials sector that have positive free cash flow.
The business' balance sheet reveals debt to be 10% of the company's capital (with equity being the remaining amount). Approximately only 21.48% of US stocks with free cash flow have a lower reliance on debt in their capital structure.
SCL's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than 42.5% of tickers in our DCF set.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
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