Value Play: OM Group Inc.

OM Group, Inc. (OMG) has seen growth in nearly all of its end markets through the first 9 months of the year and it expects demand to remain strong in 2011. It still has an attractive P/E of just 14x forward estimates.

Specialty chemicals have been hot in the global recovery as they are the building blocks for industry and manufacturing. OM Group makes chemicals and advanced materials for industrial processes and has customers around the world in 50 different industries.

If there is one business that can gauge the global recovery, it is OM Group.

Beat For the 4th Quarter in a Row

On Nov 4, OM Group reported its third quarter results and surprised on the Zacks Consensus Estimate by 21.5%. Earnings per share were 79 cents which easily beat the consensus of 65 cents.

Revenue rose 26% to $297.2 million which was helped by the Battery Technologies acquisition, higher selling prices and volume in Advanced Materials and volume growth in Specialty Chemicals.

The Advanced Materials segment saw sales rise 17% to $148.5 million while they rose 4% in Specialty Chemicals to $113.3 million.

Outlook Looks Bright

OM Group only sees good things on the horizon. While the fourth quarter is seasonally a slower quarter, it sees continued growth in 2011 as specialty chemical demand is expected to remain strong.

The analysts raised estimates on after the earnings surprise. The 2010 Zacks Consensus is up 5 cents to $2.73 per share in the last 30 days. This is earnings growth of 157.2%.

So far, earnings are expected to grow just 6% in 2011, but the Zacks Consensus is also moving higher, up 7 cents to $2.90 in the last month.

It’s a Value Stock

In addition to an attractive P/E ratio, OM Group also is trading with a price-to-book ratio of just 1.0, under its peers at 1.9.

Its price-to-sales ratio is also just 1.0, which is well within the value stock parameters.

OM Group is a Zacks #2 Rank (buy) stock.

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