Why Balchem Shares Popped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of specialty performance chemical maker Balchem (NAS: BCPC) have found the right formula for success and are shooting up 11% after the company reported first-quarter results.
So what: For the quarter, Balchem reported a 4.4% increase in revenue to $76.2 million and diluted earnings of $0.31 following record quarterly revenue from its animal health and nutrition segment, which demonstrated 5% year-over-year revenue growth. The results are actually mixed relative to the consensus estimates found on Yahoo! Finance, which called for only $73.2 million in revenue, but a profit of $0.33. Balchem CEO Dino Rossi did note that raw material costs continue to put pressure on growth in the near term.
Now what: Overall this was a very mixed report and I feel today's move higher is merely a sigh of relief from investors that raw material costs affected the stock significantly less than anyone had expected. Investing in diversified chemical companies won't lead to mind-blowing growth, but investors can generally count on consistent cash flow and (usually) a nice dividend to boot. The one question mark to that cash flow is whether raw material costs get in the way. For Balchem, things aren't nearly as bad as everyone had predicted, but, then again, at 20 times forward earnings, is Balchem really that great of a value? I'd pass at these levels, but it's worth a spot on My Watchlist to see if it can get its costs under control.
Craving more input? Start by adding Balchem to your free and personalized watchlist so you can keep up on the latest news with the company.
At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Balchem. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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