NEW YORK (TheStreet) -- Ashland Inc. (ASH) shares are up 1.3% to $108.63 on Monday after being upgraded to "buy" from "hold" by analysts at KeyBanc which set a $136 price target on the company's stock.
The firm models the chemical company's 2015 and 2016 EPS growth at 17% and 16%, respectively, while seeing a possible Valvoline spin-off as offering shareholders potential upside over time.
"We believe ASH's $200 million cost savings program is the key factor in moving ASH's EBITDA margins past 20%," said analysts, "Earnings growth comes w/solid visibility given we believe that >80% is linked to ASH's cost savings efforts and sizable share repurchase program."
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Separately, TheStreet Ratings team rates ASHLAND INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate ASHLAND INC (ASH) a BUY. This is driven by a few notable strengths, 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 reasonable valuation levels, good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $189.00 million or 32.16% when compared to the same quarter last year. Despite an increase in cash flow, ASHLAND INC's average is still marginally south of the industry average growth rate of 35.32%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- The debt-to-equity ratio is somewhat low, currently at 0.73, 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 0.94 is somewhat weak and could be cause for future problems.
- ASH, with its decline in revenue, underperformed when compared the industry average of 11.1%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: ASH Ratings Report