IOSP - Embedded Expectations Analysis - 2020 08 03
Innospec Inc. (IOSP:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with an 11.0x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about raising their dividends, balance sheet strength, and their Oilfield Specialty business plansSpecifically, management may lack confidence in their ability to further reduce costs, raise dividends, and generate Octane Additives sales. Furthermore, they may be exaggerating balance sheet and liquidity strength, and may be concerned about demand-side pressures in their Oilfield business and their ability to manage the Oilfield business through the pandemic. In addition, management may lack confidence in their ability to execute their M&A plan for their Oilfield Specialties business, and may be concerned about their ability to grow their core business in Performance Chemicals. Finally, management may be concerned about their current cash balance, their discussions with their banking group, and the sustainability of a positive price mix
Innospec develops, manufactures, blends, markets and supplies chemicals for use as fuel additives, and ingredients for personal care, home care, agrochemical, mining and other applications and oilfield chemicals. The company has four segments: Fuel Specialties, which develops, manufactures, blends, markets and supplies a range of chemical products; Performance Chemicals, which provides products focused on the personal care, home care, agrochemical and mining markets; Oilfield Services, which develops and markets products to prevent loss of mud in drilling operations, and chemical solutions; and Octane Additives, which comprises sales of tetra ethyl lead for use in automotive gasoline.
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- 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
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