Value Play: Innophos Holdings

Innophos (IPHS) is sees continuing strength in demand for specialty phosphates that has analysts pushing estimates higher. Additionally, shares have a great earnings history and pay a 2% dividend.

Shares of IPHS are hitting 52-week highs, but this Zacks #1 Rank (Strong Buy) still has solid valuations.

Company Description

Innophos is a specialty chemical company that produces phosphate products for food, beverage, pharmaceutical, oral care and industrial applications.

Valuations

Shares of IPHS are trading at just 12 times this year’s Zacks Consensus Estimate and only 10 times forecasts for 2011. Innophos’s price to book is about 2.3. The company has a price to sales of 1.1, which is pretty solid for its industry.

Estimates Rising

Earnings forecasts for Innophos are on the rise over the past few months. The full-year Zacks Consensus Estimate for 2010 is up 28 cents, to $2.84 since the last quarterly report.

Next year’s projections are up 43 cents on average, to $3.36. While earnings are expected to dip about 9% this year, that is not a foregone conclusion considering Innophos reported a 31 cent earnings surprise within the past year.

That being said, if this year’s estimate is the actual earnings number, next year’s growth rate is expected to be almost 19%.

Increasing Demand

In the latest quarterly report, which resulted in the eighth earnings surprise in the past 9 quarters, the company said it sees “strong ongoing year over year volume growth for specialty phosphates”.

We will find out if that trend is in fact continuing in the company’s upcoming earnings report, scheduled for Nov 2 after the market closes.

The Chart

IPHS is hitting 52-week highs in anticipation of that upcoming announcement, but investors are confident that the company will deliver. The solid valuations and 2% dividend don’t hurt either.

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