Kronos Worldwide (KRO) Stock Dropped, So What Is Driving Attention Now?
Kronos Worldwide (KRO) is back on investor watchlists after a meaningful shift in analyst expectations, with consensus earnings estimates moving higher and the stock now carrying an improved Zacks Rank of #2.
Kronos Worldwide’s recent share price action has been volatile, with the stock down about 3% over the past day and week but still showing a 30 day share price return of 35.4% and an 88.6% year to date share price return. The 1 year total shareholder return is 44.0%, suggesting momentum has built materially over recent months as investors reassess the company’s earnings outlook.
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Kronos Worldwide has caught attention again, with earnings expectations improving and the share price surging this year. The business appears well established in TiO2 pigments. The next question is whether that renewed optimism is already fully reflected in the valuation.
Preferred Price-to-Sales of 0.5x: Is It Justified?
The market is currently valuing Kronos Worldwide at a P/S of 0.5x, which screens as good value compared with both peers and the broader US Chemicals industry.
The P/S ratio compares the company’s market value to its revenue. For Kronos Worldwide, this lens can be useful because the business is unprofitable and reported a net loss of $109.4m on revenue of $1,943.1m, which limits the usefulness of earnings based multiples.
On this measure, KRO is trading at a P/S of 0.5x versus an estimated fair P/S of 0.7x. It is also below the US Chemicals industry average of 1.2x and the peer group average of 0.7x. That points to the market assigning a lower value to each dollar of Kronos Worldwide revenue compared with both its direct peers and the wider industry, while the fair ratio suggests some scope for the valuation to move closer to that higher level.
Explore the SWS fair ratio for Kronos Worldwide
Result: Price-to-sales of 0.5x (UNDERVALUED)
However, investors still face risks if Kronos Worldwide remains unprofitable or if analyst optimism cools, given the share price already tracks close to the US$8.50 target.
Find out about the key risks to this Kronos Worldwide narrative.
Another View on Kronos Worldwide’s Valuation
The SWS DCF model values Kronos Worldwide at $9.96 per share, compared with the current price of $8.45. That suggests the stock trades at a discount to its estimated future cash flow value. If both the P/S and DCF point to undervaluation, what might investors be overlooking?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Kronos Worldwide for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 52 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
If this combination of renewed optimism and clear risks around Kronos Worldwide has your attention, consider acting promptly: review the underlying data and form your own view with the 2 key rewards and 4 important warning signs.
Looking for more investment ideas beyond Kronos Worldwide?
If Kronos Worldwide has sharpened your focus, do not stop here. Broaden your watchlist with other clear stock ideas that match different investing priorities.
- Target resilient balance sheets and steady fundamentals by scanning the list of solid balance sheet and fundamentals (53 results) that can help anchor your portfolio.
- Hunt for potential value opportunities by reviewing the 52 high quality undervalued stocks that might be flying under the radar.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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