Buy Omnova Solutions (NYSE: OMN)

By Linda McDonough • August 17, 2016

This specialty chemical company has been squeezing more profits from less revenue. A 2014 restructuring that included selling off less profitable lines, introducing more profitable specialized products and closing excess manufacturing capacity, has begun to bear fruit.

Earnings more than doubled the first six months of the year and are expected to grow 58% for  full fiscal year 2016 and another 26% in 2017.

Our $15 target offers 66% upside to investors.

 

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Jon D.

Jon D.

It should be of interest to note the last trade yesterday; I draw your attention to this on my chart.
http://schrts.co/A0MHrw
also I want to point out the bollinger band squeeze on the chart. This heralds an increase in volatility. We can only know the direction by following the price action. The dashed centerline is the 20 day moving average where price action has consolidated. RSI is still in an uptrend area MACD is close to flipping positive as is PPO when these flip positive it can be considered a buy signal. Note the DOJI [+] prior to aug 1st a fallen window in candlesticks , an area of resistance. We need a rising window now to clear this or in english terms a Gap up opening. I consider the pattern in price action to be forming an ascending triangle [draw a line from 8/1 at 8.40 to yesterdays close a break above this would be bullish for us to enter. The balancing thing for us to be aware of is August is a P A I N F U L LY slow month, made even worse by the fact it is an election year.
Best Wishes,
Jon D. “who will be watching price at the open”

Aaron Cavender

Aaron Cavender

Linda,

Do you have any update on OMN and its recent drop? All I can tell is they missed earnings and were heavily penalized. Are the fundamentals still sound?

Thanks,
-Aaron

Linda McDonough

Linda McDonough

Aaron,
The company reported earnings of 14c, up just slightly from last year but missed estimates by 3c. The company’s performance chemicals segment continues to do well with income more than doubling. However a delay in a manufacturing plant by one of its customers put a dent in Omnova’s engineered surface division whose products will be used in the factory. Management expects some orders from this customer to be placed by year end and more robust ones in 2017. The company refinanced its debt which will free up $2 million of interest annually. We are giving this new holding a one quarter grace period to return to growth but will be watching it closely.
Best,
Linda

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