The firm said it raised its rating on the paint and coatings company as it believes the decline in oil is positive occurrence for this industry.
"We believe the effects of the recent 30% decrease in the price of oil are positive for the paint and coatings industry and create investment opportunities," JPMorgan said.
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"We have built in a ~30 cents per share EPS raw material benefit for Valspar in 2015, which assumes that petrochemical raw materials decrease (6.2%) and raw materials generally by (1.6%), and cost of goods sold decreases by about (1.1%), the firm added.
Separately, TheStreet Ratings team rates VALSPAR CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate VALSPAR CORP (VAL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VAL's revenue growth has slightly outpaced the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 11.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- VALSPAR CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VALSPAR CORP increased its bottom line by earning $4.02 versus $3.20 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus $4.02).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 70.1% when compared to the same quarter one year prior, rising from $63.51 million to $108.06 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Chemicals industry and the overall market, VALSPAR CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: VAL Ratings Report