CC - Valens Credit Report - 2023 11 20
Credit markets are grossly overstating CC's credit risk with a YTW of 9.084% relative to an Intrinsic YTW of 6.454%, while CDS markets are materially overstating credit risk with a CDS of 355bps relative to an Intrinsic CDS of 180bps. Furthermore, Moody's is overstating the company's fundamental credit risk, with its speculative Ba3 credit rating three notches lower than Valens' XO (Baa3) credit rating.Incentives Dictate Behavior™ analysis highlights mostly positive signals for creditors. CC's compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should lead to Uniform ROA expansion and increased cash flows to service debt obligations. In addition, most members of management are material owners of CC equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company.
Earnings Call Forensics™ of CC's Q3 2023 (10/27/2023) call highlights that management is confident they expect their Thermal and Specialized Solutions equipment transition to be ready for 2025.
Chemours is a provider of performance chemicals. The company has three reportable segments: Fluoroproducts, Chemical Solutions, and Titanium Technologies. The company's Fluoroproducts segment is a provider of fluoroproducts, including refrigerants and industrial fluoropolymer resins. The company's Chemical Solutions segment is a North American provider of industrial chemicals used in gold production, industrial, and consumer applications. The company's Titanium Technologies segment is a provider of titanium dioxide pigment, a white pigment used to deliver whiteness, brightness, opacity, and protection in a variety of applications.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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