NEW YORK (TheStreet) --RBC Capital Markets upgraded Olin Corp. (OLN) - Get Report to "outperform" from "sector perform" on Friday.

The analyst firm raised its price target for the chemical company to $23 from $21.

RBC analysts said that while it does not believe the progression will be linear, and acknowledge that there are still risks, they believe that "several positive factors" have changed that improve the risk-reward in Olin's stock.

"Our new positive view is based on the convergence of three major points: Higher Caustic Soda Pricing, Oncoming Capacity Closure Announcements, and Cost and Synergy gains to Olin from the Dow merger that appear undervalued," the analysts wrote. "We are not changing our 2015-16 estimates ahead of Olin's Q3 report on November 3rd, which will likely be challenged on $15/ton of Q3 caustic price declines."

TST Recommends

TheStreet Ratings team rates OLIN CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate OLIN CORP (OLN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Chemicals industry average. The net income increased by 13.4% when compared to the same quarter one year prior, going from $37.30 million to $42.30 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 14.8%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for OLIN CORP is rather low; currently it is at 21.59%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.90% trails that of the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Chemicals industry and the overall market, OLIN CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: OLN