AdvanSix Inc

AdvanSix Inc (NYSE: ASIX) is a US-listed Chemicals Company. The Company is engaged in the manufacturing of Nylon 6, used in the production of films, engineered plastics, filaments and fibers.

Investment Highlights – AdvanSix Inc – Expensive at USD 28.51

• Despite the improved financial performance in FY2020, the Company’s operations were impacted by the covid-19 pandemic.
• The Company has a decent Liquidity position with a current ratio of 1.16x in the financial year 2020, while it is lower than the industry median of 1.92x.
• As per valuation metrics, the Price/Earnings multiple of AdvanSix Inc is currently higher as compared to the corresponding multiple of the Chemicals industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 71 level), which means the stock price could decline in the short term.

Key Risks

• The emergence of the Covid-19 pandemic has significantly impacted global markets and presented major challenges for the chemical industry.
• Fluctuations in exchange rates could impact the profitability and balance sheet position.

Financial Highlights – FY2020 (31 December 2020) (released on 19 February 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, due to lower revenue from the US business, the sales declined to $1,157,917 thousand.
• Driven by lower costs and expenses, the profitability for the period improved. The Company reported a higher net income of $46,077 thousand in FY2020.
• The cash balance as on 31 December 2020 improved to $10,606 thousand (31 December 2019: $7,050 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company has shown an increase in financial performance in the financial year 2020. Despite the lower revenue, the profitability for the period improved, with a higher liquidity position and well-positioned balance sheet. AdvanSix operations were impacted by the outbreak of the covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs. Presently, the company is trading near a 52-week high, raising doubts about its upside potential at current prices. The stock made a 52-week low and high of USD 8.06 and USD 30.32, respectively.

Based on the factors highlighted above, we believe the stock of AdvanSix Inc is “Expensive” at the closing price of USD 28.51 (as on 19 February 2021), with support from few catalysts needs to be evaluated at a later stage such benefits of disciplined cost and cash management.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.