A. Schulman: A Better Buy Than Dow Chemical Or DuPont?

Source: Thinkstock

Source: Thinkstock

My goodness, what a performance! The little known A. Schulman, Inc. (NASDAQ:SHLM) just delivered a huge knockout quarter, and I think you definitely need to know about this company. Perhaps you are an owner of one of the company’s main competitors, such as Dow Chemical Company (NYSE:DOW) or DuPont (NYSE:DD). If so, you probably want to learn about this up and comer. While Dow Chemical and DuPont each have similar business models to A. Schulman, they also have unique differences. Perhaps the one big thing to note is that Dow Chemical trades at 13 times earnings, DuPont at 20 times earnings, and A. Schulman trades at 50 times earnings. However, I think A. Schulman has earned this premium multiple.

While similar to Dow Chemical and DuPont in many respects, it is also different in many respects. It supplies plastic compounds and resins for packaging, automotive, consumer products, and industrial applications. It offers carbon black and white color concentrates, absorptive concentrates that reduce odors, anti-static concentrates, additive solutions which enhance the appearance and performance of plastics and solutions that minimize the use of plastics or incorporate the use of either recycled plastics or renewable-based polymers.

The company also provides polymer solutions, which provide customized cross-linked resins, multi-component blends, including polyolefins, nylons, polyesters, elastomers, ionomers, and acrylonitrile butadiene styrene. It also creates reinforcements, such as glass and carbon, nano-reinforcements, flame retardants, impact modifiers, and UV stabilization. In addition, it offers specialty powders that include size reduction and resins for the injection, blow molding, and rotational molding markets. Further, the company provides custom performance colors, including standard and customized colors, organic and inorganic pigments, high chroma colors in translucent or opaque formats, and special effects paints. It’s a unique company that you should be aware of. Now to the meat of the article — and the reason the stock has caught my eye.

Lets start East of the Atlantic. In the fiscal 2014 third-quarter, net sales in the Europe, Middle East, and Africa (EMEA) segment increased 14 percent compared with the same period last year. Sales and volume benefited from greater demand as a result of continued strengthening in the automotive market and consistent strength in the packaging market. Foreign currency translation positively impacted the segment’s net sales by $21.6 million. EMEA gross profit was $56.8 million for the quarter, an increase of $8.1 million compared with the same three-month period last year. The increase in gross profit was primarily attributed to the incremental contribution of the Perrite business acquisition, favorable product mix and overall higher volumes in all product families. Foreign currency translation positively impacted EMEA gross profit by $2.9 million.