How Huntsman’s Valuation Compares
Huntsman’s forward price-to-earnings multiple
On September 13, 2017, Huntsman’s (HUN) one-year forward PE (price-to-earnings) multiple was 12.4x. To compare, peer Eastman Chemical’s (EMN) multiple was 10.8x. Forward PE multiples can be used to compare companies operating in the same industry.
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Huntsman trades at premium
At present, Huntsman is trading at a premium to Eastman Chemical. Analysts expect Huntsman to post EPS (earnings per share) of $1.96 in fiscal 2017, representing 43.8% growth since fiscal 2016. Analysts forecast Huntsman’s EPS to be $2.08 in fiscal 2018, 6.5% higher than its expected 2017 EPS.
Eastman Chemical’s fiscal 2017 EPS are expected to be $7.52, 11.2% growth from fiscal 2016. Analysts expect its EPS to rise 8.4% between fiscal 2017 and fiscal 2018.
The agreement to combine Huntsman and Clariant has boosted Huntsman stock. The new company is expected to generate $400 million in cost synergies and drive growth. Also, the Venator spin-off is expected to create value for investors, resulting in the stock trading at a premium to peers.
Investors interested in Huntsman could invest in the ProShares Ultra Basic Materials ETF (UYM), which has invested 0.60% of its portfolio in Huntsman. The fund also provides exposure to Air Products and Chemicals (APD) and LyondellBasell (LYB), which had weights of 3.3% and 3.2%, respectively, as of September 13, 2017.