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3 Chemicals Stocks Driving The Industry Higher

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 100 points (0.6%) at 16,838 as of Thursday, June 5, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 2,349 issues advancing vs. 623 declining with 153 unchanged.

The Chemicals industry as a whole closed the day up 1.1% versus the S&P 500, which was up 0.6%. Top gainers within the Chemicals industry included NL Industries ( NL), up 3.5%, Oil-Dri Corp of America ( ODC), up 3.9%, Ceres ( CERE), up 4.4%, KMG Chemicals ( KMG), up 2.5% and Arabian American Development ( ARSD), up 9.2%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

KMG Chemicals ( KMG) is one of the companies that pushed the Chemicals industry higher today. KMG Chemicals was up $0.38 (2.5%) to $15.84 on light volume. Throughout the day, 9,172 shares of KMG Chemicals exchanged hands as compared to its average daily volume of 22,200 shares. The stock ranged in a price between $15.25-$15.91 after having opened the day at $15.36 as compared to the previous trading day's close of $15.46.

KMG Chemicals, Inc., through its subsidiaries, is engaged in the manufacture, formulation, and distribution of specialty chemicals primarily in the United States, Canada, Mexico, Europe, and Asia. It operates in two segments, Electronic Chemicals and Wood Treating Chemicals. KMG Chemicals has a market cap of $179.8 million and is part of the basic materials sector. Shares are down 8.5% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate KMG Chemicals a buy, no analysts rate it a sell, and 1 rates it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates KMG Chemicals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on KMG go as follows:

  • The revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 47.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 240.89% to $7.79 million when compared to the same quarter last year. In addition, KMG CHEMICALS INC has also vastly surpassed the industry average cash flow growth rate of 37.62%.
  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, KMG CHEMICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of KMG CHEMICALS INC has not done very well: it is down 23.07% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

You can view the full analysis from the report here: KMG Chemicals Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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