Specialty chemicals are still in demand. Georgia Gulf Corporation (GGC) is expected to see double digit earnings growth in both 2011 and 2012. Yet this Zacks #1 Rank (strong buy) is still cheap, with a forward P/E of 8.2.
Georgia Gulf manufactures chlorovinyls and aromatic chemicals as well as vinyl-based building and home improvement products. Its home improvement products include window and door profiles, mouldings, siding, pipe and pipe fittings and deck, fence and rail products.
Georgia Gulf Beat By 27.3% in the Second Quarter
On Aug 3, Georgia Gulf reported second quarter results and surprised on the Zacks Consensus by 9 cents. Earnings per share were 42 cents compared to the consensus of just 33 cents.
It has surprised 2 out of the last 4 quarters and is scheduled to report its third quarter results on Nov 21.
Sales jumped 13% to $831.7 million from $735.7 million in the second quarter of 2010. All 3 segments saw higher sales.
Chlorovinyls rose 7.6% to $323.7 million due to higher caustic soda and resin sales despite an unplanned chloralkali outage. Aromatics increased 22% to $233.9 million. from $191.6 million and Building Products climbed 12.7% to $274.2 million compared to $243.2 million a year ago.
Double Digit Earnings Growth Expected
For 2011, the Zacks Consensus has fallen a penny in the last 30 days to $2.02 per share. This is still tremendous earnings growth of 65.3% compared to 2010. In 2010, the company made just $1.22.
The earnings growth is expected to continue in 2012 with the Zacks Consensus jumping to $2.85 per share. That is earnings growth of 41%.
Strong Value Fundamentals
Georgia Gulf had been one of the hottest stocks around for the first half of 2011 before it reversed course and plunged.
But the sell off presents an opportunity for value investors.
In addition to a P/E of just 8.2, Georgia Gulf has a price-to-book ratio of only 1.2. A P/B ratio under 3.0 usually indicates value.
The company also has a price-to-sales ratio of just 0.2. A P/S ratio under 1.0 means a company is undervalued.
It also has a solid 1-year return on equity (ROE) of 14.8%.
With double digit earnings growth still expected and the stock sell off, Georgia Gulf is an attractive stock for value investors. Tune in for its next earnings report, scheduled for Nov 21.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
