AdvanSix Inc

AdvanSix Inc (NYSE: ASIX) is a US-listed Chemicals Company. The Company is engaged in the manufacturing of Nylon 6, used in the production of films, engineered plastics, filaments and fibers.

Investment Highlights – AdvanSix Inc – Expensive at USD 28.51

• Despite the improved financial performance in FY2020, the Company’s operations were impacted by the covid-19 pandemic.
• The Company has a decent Liquidity position with a current ratio of 1.16x in the financial year 2020, while it is lower than the industry median of 1.92x.
• As per valuation metrics, the Price/Earnings multiple of AdvanSix Inc is currently higher as compared to the corresponding multiple of the Chemicals industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 71 level), which means the stock price could decline in the short term.

Key Risks

• The emergence of the Covid-19 pandemic has significantly impacted global markets and presented major challenges for the chemical industry.
• Fluctuations in exchange rates could impact the profitability and balance sheet position.

Financial Highlights – FY2020 (31 December 2020) (released on 19 February 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, due to lower revenue from the US business, the sales declined to $1,157,917 thousand.
• Driven by lower costs and expenses, the profitability for the period improved. The Company reported a higher net income of $46,077 thousand in FY2020.
• The cash balance as on 31 December 2020 improved to $10,606 thousand (31 December 2019: $7,050 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company has shown an increase in financial performance in the financial year 2020. Despite the lower revenue, the profitability for the period improved, with a higher liquidity position and well-positioned balance sheet. AdvanSix operations were impacted by the outbreak of the covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs. Presently, the company is trading near a 52-week high, raising doubts about its upside potential at current prices. The stock made a 52-week low and high of USD 8.06 and USD 30.32, respectively.

Based on the factors highlighted above, we believe the stock of AdvanSix Inc is “Expensive” at the closing price of USD 28.51 (as on 19 February 2021), with support from few catalysts needs to be evaluated at a later stage such benefits of disciplined cost and cash management.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

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