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Is Avantor a Smart Chemical Stock to Buy in Q1 2022?

Chemicals and materials company Avantor (AVTR) has made significant investments in its single-use capabilities to meet the rising worldwide demand for single-use equipment and dependable supply over the past year. This, along with other favorable developments across its segments, has supported its financial performance. So, let's evaluate if it is worth owning the stock now.

Avantor Inc. (AVTR) in Radnor, Pa., is a global leader in delivering mission-critical products and services to clients in the biopharma, healthcare, education, government, advanced technologies, and applied materials industries.

The company recently announced that Rajiv Gupta would step down from its Board of Directors after his current term after more than a decade of service and will not run for re-election at the annual shareholders meeting on May 12, 2022. Later this month, the Board will announce the appointment of a new Board chair.

AVTR’s stock has been down 10.3% in price over the past three months and 5.9% over the past month. In addition, closing yesterday's trading session at $35.48, the stock is currently trading 20% below its 52-week high of $44.37, which it hit on Sept. 23, 2021.

Here is what could shape AVTR's performance in the near term:

Impressive Growth Prospects

The Street expects AVTR's revenues and EPS to rise 8.5% and 7.1%, respectively, year-over-year to $8.02 billion and $ its fiscal 2022. In addition, AVTR's EPS is expected to rise at a 20% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in all the trailing four quarters.

Mixed Profitability

AVTR's 19.7% EBITDA margin is 219.9% higher than its industry’s 6.2% average Also, its $953.6 million in cash from operations compares to its negative $17.62 million industry average. However, its 33.9% trailing-12-months gross profit margin is 39.6% lower than the 56.1% industry average of. Also, its 1.5% trailing-12-months CAPEX/Sales multiple  is 63.5% lower than the 4.1% industry average.

POWR Ratings Reflect Uncertainty

AVTR has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AVTR has a C grade for Stability and Quality. The stock's 1.63 beta is in sync with the Stability grade. In addition, AVTR's mixed profitability is consistent with the Quality grade.

Among 89 stocks in the A-rated Chemical industry, AVTR is ranked #76.

Beyond what I have stated above, you can view AVTR ratings for Growth, Value, Momentum, and Sentiment here.

Bottom Line

While AVTR's diversified product portfolio and continuing efforts to boost its growth have aided its financial performance, the stock has lost significant ground over the past few months. In addition, it is currently trading below its 50-day and 200-day moving averages of $38.29 and $37.56, respectively, indicating a downtrend. So, we think investors should wait before scooping up its shares.

How Does Avantor Inc. (AVTR) Stack Up Against its Peers?

While AVTR has an overall C rating, one might want to consider its industry peers, ICL Group Ltd. (ICL), Arkema S.A (ARKAY), and Kronos Worldwide Inc. (KRO) which have an overall A (Strong Buy) rating.

AVTR shares were trading at $34.83 per share on Thursday afternoon, down $0.65 (-1.83%). Year-to-date, AVTR has declined -17.35%, versus a -7.59% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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