In Focus – SHLM

In this regular recurring report, we do a more in-depth analysis of one of the several thousand companies we follow. In this report we report on A Schulman Incorporated (SHLM).

Background

A Schulman Incorporated (SHLM) is a supplier of plastic compounds and resins. SHLM is in many different types of markets, including industrial, automotive, consumer products, and packaging.  SHLM operates mainly in four lines of business: masterbatch, engineered products, rotomolding, and distribution.

The company is headquartered in Akron, Ohio. It has a worldwide business presence. It conducts business in North America, Europe, the Middle East, Africa and Asia (Pacific).

Stock Fundamentals

SHLM’s operating performance over the past seven to eight years has actually been pretty good. Its sales have been relatively strong and steady. It has consistently paid (and even increased) its dividend over the last business cycle. And it does not score poorly on the other metrics we look that reveal a firm’s operating efficiency.

Our greatest problems with SHLM are these. It has taken out a great deal of debt to fund its latest acquisitions. Its leverage ratio is now above its long-term average and it is above what we consider prudent or optimal. It has weakened its balance sheet in other ways. In the face of a slowing economy, this move could prove very painful.

Additionally, SHLM is no longer cheap. Its price-to-sales ratio is modest. But on most other multiples, it is richly priced. And when these ratios are put in relative, SHLM looks even more expensive.

On balance, we feel that SHLM’s overall fundamentals are below average. And we would not consider it one of the best stocks to buy now.

Stat Sheet – A Schulman Incorporated    4/28/16

Ticker SHLM
Industry Chemicals – Plastics & Rubber
Price $ 27.92
Market Cap  $ 816
Dividend Yield 2.94
Dividend/CFOp 0.267
Equity/Assets 0.196
Average Equity/Assets 0.348
Financial Strength Below Average
Growth Prospects Below Average
Beta 1.74
Price Volatility Average
Stock Fundamentals D

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

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Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

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In Focus – SHLM

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