NEW YORK (TheStreet) -- The Dow Chemical Company
(DOW) was rising 5.4% to $45.40 on Tuesday after Daniel Loeb revealed that his hedge fund, Third Point, had taken a stake in the company.
According to The Wall Street Journal, Loeb revealed the news in a letter to investors released on The Harvest Exchange, a site where investors can share ideas. Loeb said that Dow Chemical is currently Third Point's largest stake but did not reveal his position.
Loeb called for a share buyback and a spinoff of its petrochemicals business to improve profitability.
"We believe the benefits from a spinoff, including financial uplift from operational improvements at Dow Petchem Co. and the potential valuation uplift from increased business focus and disclosure, far outweigh the supposed integration benefits," Third Point said in the letter, according to Bloomberg.
TheStreet Ratings team rates DOW CHEMICAL as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DOW CHEMICAL (DOW) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, solid stock price performance, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Chemicals industry average. The net income increased by 16.7% when compared to the same quarter one year prior, going from $582.00 million to $679.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 0.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 28.01% which was in line with the performance of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- Net operating cash flow has increased to $1,402.00 million or 27.10% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.79%.
- You can view the full analysis from the report here: DOW Ratings Report
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