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Have you been paying attention to shares of Cabot (CBT)? Shares have been on the move with the stock up 8.8% over the past month. The stock hit a new 52-week high of $108.39 in the previous session. Cabot has gained 28.7% since the start of the year compared to the -3.7% move for the Zacks Basic Materials sector and the -2.3% return for the Zacks Chemical - Diversified industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 5, 2024, Cabot reported EPS of $1.92 versus consensus estimate of $1.74.
For the current fiscal year, Cabot is expected to post earnings of $7.07 per share on $4.01 billion in revenues. This represents a 31.41% change in EPS on a 2% change in revenues. For the next fiscal year, the company is expected to earn $7.82 per share on $4.21 billion in revenues. This represents a year-over-year change of 10.61% and 5.04%, respectively.
Valuation Metrics
Cabot may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Cabot has a Value Score of A. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 15.2X current fiscal year EPS estimates, which is not in-line with the peer industry average of 18.3X. On a trailing cash flow basis, the stock currently trades at 13.2X versus its peer group's average of 8.6X. Additionally, the stock has a PEG ratio of 1. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Cabot currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Cabot meets the list of requirements. Thus, it seems as though Cabot shares could have potential in the weeks and months to come.
Zacks Investment Research
For those looking to find strong Basic Materials stocks, it is prudent to search for companies in the group that are outperforming their peers. Is Cabot (CBT) one of those stocks right now? A quick glance at the company's year-to-date performance in comparison to the rest of the Basic Materials sector should help us answer this question.
Cabot is one of 236 individual stocks in the Basic Materials sector. Collectively, these companies sit at #16 in the Zacks Sector Rank. The Zacks Sector Rank includes 16 different groups and is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors.
The Zacks Rank is a successful stock-picking model that emphasizes earnings estimates and estimate revisions. The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months. Cabot is currently sporting a Zacks Rank of #2 (Buy).
The Zacks Consensus Estimate for CBT's full-year earnings has moved 4.2% higher within the past quarter. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.
Our latest available data shows that CBT has returned about 21.5% since the start of the calendar year. At the same time, Basic Materials stocks have lost an average of 6.8%. This shows that Cabot is outperforming its peers so far this year.
Another stock in the Basic Materials sector, Vista Gold (VGZ), has outperformed the sector so far this year. The stock's year-to-date return is 37.1%.
In Vista Gold's case, the consensus EPS estimate for the current year increased 250% over the past three months. The stock currently has a Zacks Rank #2 (Buy).
To break things down more, Cabot belongs to the Chemical - Diversified industry, a group that includes 29 individual companies and currently sits at #213 in the Zacks Industry Rank. Stocks in this group have lost about 5.7% so far this year, so CBT is performing better this group in terms of year-to-date returns.
In contrast, Vista Gold falls under the Mining - Gold industry. Currently, this industry has 37 stocks and is ranked #137. Since the beginning of the year, the industry has moved +21.7%.
Investors with an interest in Basic Materials stocks should continue to track Cabot and Vista Gold. These stocks will be looking to continue their solid performance.
Zacks Investment Research
Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a great growth stock is not easy at all.
That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.
However, the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects, makes it pretty easy to find cutting-edge growth stocks.
Our proprietary system currently recommends Cabot (CBT) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Studies have shown that stocks with the best growth features consistently outperform the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Here are three of the most important factors that make the stock of this chemical company a great growth pick right now.
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Cabot is 20.5%, investors should actually focus on the projected growth. The company's EPS is expected to grow 31.4% this year, crushing the industry average, which calls for EPS growth of 7.5%.
Impressive Asset Utilization Ratio
Growth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, Cabot has an S/TA ratio of 1.1, which means that the company gets $1.1 in sales for each dollar in assets. Comparing this to the industry average of 0.73, it can be said that the company is more efficient.
While the level of efficiency in generating sales matters a lot, so does the sales growth of a company. And Cabot is well positioned from a sales growth perspective too. The company's sales are expected to grow 2% this year versus the industry average of 0%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
There have been upward revisions in current-year earnings estimates for Cabot. The Zacks Consensus Estimate for the current year has surged 0.2% over the past month.
Bottom Line
While the overall earnings estimate revisions have made Cabot a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
This combination indicates that Cabot is a potential outperformer and a solid choice for growth investors.
Zacks Investment Research
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is Cabot (CBT). CBT is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 12.94, while its industry has an average P/E of 15.39. Over the past 52 weeks, CBT's Forward P/E has been as high as 14.37 and as low as 10.32, with a median of 12.52.
Investors should also note that CBT holds a PEG ratio of 0.85. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CBT's PEG compares to its industry's average PEG of 1.06. Over the last 12 months, CBT's PEG has been as high as 2.66 and as low as 0.79, with a median of 0.95.
Finally, investors should note that CBT has a P/CF ratio of 8.92. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. CBT's current P/CF looks attractive when compared to its industry's average P/CF of 10.50. CBT's P/CF has been as high as 9.54 and as low as 6.25, with a median of 8.33, all within the past year.
These are just a handful of the figures considered in Cabot's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that CBT is an impressive value stock right now.
Zacks Investment Research
Reporter Name | Relationship | Type | Amount | SEC Filing |
---|---|---|---|---|
Mclaughlin Erica | Executive Vice President, CFO | Sell | $1,708,484 | Form 4 |
Zhu Jeff Ji | Executive Vice President | Sell | $1,551,510 | Form 4 |
CABOT CORP has seen significant stock transactions by its executives, with sales totaling over $3.2 million.
Erica McLaughlin, Executive Vice President and CFO, sold 16,390 shares of common stock on August 27, 2024, for a total of $1,708,484. The sales were conducted at weighted average prices of $104.491 and $104.139, with prices ranging from $104.120 to $104.510. Following these transactions, McLaughlin directly owns 59,814 shares and indirectly owns 1 share through the Corporation's 401(k) Plan.
Zhu Jeff Ji, Executive Vice President, sold a total of 14,912 shares on August 26 and 27, 2024, for a total sale amount of $1,551,510. The sales were conducted at weighted average prices of $106.191, $103.8482, and $104.41, with prices varying within specified ranges for each transaction. Following these transactions, Zhu directly owns 82,289 shares of CABOT CORP.
Taking full advantage of the stock market and investing with confidence are common goals for new and old investors, and Zacks Premium offers many different ways to do both.
The popular research service can help you become a smarter, more self-assured investor, giving you access to daily updates of the Zacks Rank and Zacks Industry Rank, the Zacks #1 Rank List, Equity Research reports, and Premium stock screens.
Zacks Premium also includes the Zacks Style Scores.
What are the Zacks Style Scores?
The Zacks Style Scores is a unique set of guidelines that rates stocks based on three popular investing types, and were developed as complementary indicators for the Zacks Rank. This combination helps investors choose securities with the highest chances of beating the market over the next 30 days.
Based on their value, growth, and momentum characteristics, each stock is assigned a rating of A, B, C, D, or F. The better the score, the better chance the stock will outperform; an A is better than a B, a B is better than a C, and so on.
The Style Scores are broken down into four categories:
Value Score
For value investors, it's all about finding good stocks at good prices, and discovering which companies are trading under their true value before the broader market catches on. The Value Style Score utilizes ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and a host of other multiples to help pick out the most attractive and discounted stocks.
Growth Score
While good value is important, growth investors are more focused on a company's financial strength and health, and its future outlook. The Growth Style Score takes projected and historic earnings, sales, and cash flow into account to uncover stocks that will see long-term, sustainable growth.
Momentum Score
Momentum trading is all about taking advantage of upward or downward trends in a stock's price or earnings outlook, and these investors live by the saying "the trend is your friend." The Momentum Style Score can pinpoint good times to build a position in a stock, using factors like one-week price change and the monthly percentage change in earnings estimates.
VGM Score
If you want a combination of all three Style Scores, then the VGM Score will be your friend. It rates each stock on their combined weighted styles, helping you find the companies with the most attractive value, best growth forecast, and most promising momentum. It's also one of the best indicators to use with the Zacks Rank.
How Style Scores Work with the Zacks Rank
The Zacks Rank is a proprietary stock-rating model that harnesses the power of earnings estimate revisions, or changes to a company's earnings expectations, to help investors build a successful portfolio.
#1 (Strong Buy) stocks have produced an unmatched +25.41% average annual return since 1988, which is more than double the S&P 500's performance over the same time frame. However, the Zacks Rank examines a ton of stocks, and there can be more than 200 companies with a Strong Buy rank, and another 600 with a #2 (Buy) rank, on any given day.
This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.
That's where the Style Scores come in.
You want to make sure you're buying stocks with the highest likelihood of success, and to do that, you'll need to pick stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B. If you like a stock that only as a #3 (Hold) rank, it should also have Scores of A or B to guarantee as much upside potential as possible.
As mentioned above, the Scores are designed to work with the Zacks Rank, so any change to a company's earnings outlook should be a deciding factor when picking which stocks to buy.
A stock with a #4 (Sell) or #5 (Strong Sell) rating, for instance, even one with Scores of A and B, will still have a declining earnings forecast, and a greater chance its share price will fall too.
Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.
Boston, MA-based Cabot Corporation is a leading global specialty chemicals and performance materials company. The company offer a broad range of products and solutions to customers in every corner of the planet, catering to major industries such as transportation, infrastructure, environment and consumer. Its major products include rubber and specialty grade carbon blacks, specialty compounds, activated carbons, fumed metal oxides, inkjet colorants, aerogel and cesium formate drilling fluids.
CBT is a #2 (Buy) on the Zacks Rank, with a VGM Score of A.
Momentum investors should take note of this Basic Materials stock. CBT has a Momentum Style Score of A, and shares are up 6.1% over the past four weeks.
Three analysts revised their earnings estimate upwards in the last 60 days for fiscal 2024. The Zacks Consensus Estimate has increased $0.29 to $7.07 per share. CBT boasts an average earnings surprise of 8.6%.
With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, CBT should be on investors' short list.
Zacks Investment Research
For those looking to find strong Basic Materials stocks, it is prudent to search for companies in the group that are outperforming their peers. Has Cabot been one of those stocks this year? Let's take a closer look at the stock's year-to-date performance to find out.
Cabot is one of 236 individual stocks in the Basic Materials sector. Collectively, these companies sit at #15 in the Zacks Sector Rank. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.
The Zacks Rank is a proven model that highlights a variety of stocks with the right characteristics to outperform the market over the next one to three months. The system emphasizes earnings estimate revisions and favors companies with improving earnings outlooks. Cabot is currently sporting a Zacks Rank of #2 (Buy).
The Zacks Consensus Estimate for CBT's full-year earnings has moved 4.2% higher within the past quarter. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.
Based on the latest available data, CBT has gained about 25.4% so far this year. In comparison, Basic Materials companies have returned an average of -2.3%. This shows that Cabot is outperforming its peers so far this year.
Element Solutions is another Basic Materials stock that has outperformed the sector so far this year. Since the beginning of the year, the stock has returned 12.4%.
In Element Solutions' case, the consensus EPS estimate for the current year increased 4.5% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).
Breaking things down more, Cabot is a member of the Chemical - Diversified industry, which includes 29 individual companies and currently sits at #225 in the Zacks Industry Rank. Stocks in this group have lost about 2.2% so far this year, so CBT is performing better this group in terms of year-to-date returns.
On the other hand, Element Solutions belongs to the Chemical - Specialty industry. This 33-stock industry is currently ranked #177. The industry has moved -17.1% year to date.
Cabot and Element Solutions could continue their solid performance, so investors interested in Basic Materials stocks should continue to pay close attention to these stocks.
Zacks Investment Research
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