Currently, it isn't advisable to invest in Celanese shares.
Celanese, represented by its ticker symbol NYSE:CE, is currently grappling with a harsh reality as customer demand takes a nosedive. This downturn in demand has led to a double whammy for the company, resulting in decreased sales volumes and lower prices. In fact, the troubles were so severe in the fourth quarter that Celanese recorded an extensive loss of $1.4 billion on revenue of $2.4 billion.
CE's stock fell hard after the announcement, plummeting by 21%. At its current price of around $55, many question its attractiveness. But peeling back the layers, there are several reasons why CE stock might not be a worthwhile investment.
The company's recent financial performance has been poor, with operating results that leave much to be desired. When compared to the S&P 500 across various valuation metrics, such as price-to-sales (P/S), price-to-operating income (P/EBIT), and price-to-earnings (P/E) ratios, Celanese's stock emerges as incredibly cheap.
However, looking beyond the raw numbers, the stock's recent slump is not surprising. Revenue growth for Celanese has remained stagnant or even declined in recent years, as it struggled to keep pace with the market. For instance, the company's revenues have shown an average annual growth rate of 25.8% over the past three years, compared to a rate of 9.8% for the S&P 500. In the past 12 months alone, Celanese's revenues have shrunk by 2.2%, while the S&P 500 continued to grow at a rate of 5.6%.
Profitability factors are also less than stellar for Celanese, with a moderate operating margin of 10.5% compared to the S&P 500's 12.6%. The company's financial stability is also weak, with a poor Debt-to-Equity Ratio and a Cash-to-Assets Ratio that contrast starkly with the S&P 500.
The downturn resilience of CE stock is also a concern, as the company has performed poorly in comparison to the S&P 500 during the past two economic downturns. In the 2007-09 recession, CE stock experienced an 84.9% decline compared to the S&P 500's 56.8%. While CE stock did eventually recover, it took a staggering 1,522 days to do so.
In conclusion, while Celanese's valuation may suggest it's a good buy, its recent financial performance and weak resilience during downturns paint a troubling picture. Given its severe challenges, it's understandable why many investors may be hesitant to jump aboard.
- Despite the attractive valuation of Celanese's stock, as represented by its low price-to-sales, price-to-operating income, and price-to-earnings ratios, its current price of around $55 raises questions about its appeal.
- The harsh reality for Celanese, as symbolized by its ticker NYSE:CE, is a decrease in customer demand, resulting in lower revenues and earnings for the chemicals company.
- The fourth quarter of Celanese's operations saw a significant loss, with a revenue of $2.4 billion leading to an extensive loss of $1.4 billion.
- During the 2007-09 recession, Celanese stock performed poorly in comparison to the S&P 500, experiencing a decline of 84.9% versus the S&P 500's 56.8%.
- Celanese's profitability, represented by its moderate operating margin and weak financial stability, is less than stellar compared to the S&P 500, raising concerns about its resilience during economic downturns.
