The specialty chemicals sector is experiencing robust growth as industries increasingly rely on advanced materials for high-performance applications. Unlike commodity chemicals, specialty chemicals are engineered to provide specific functionalities, such as improved durability, efficiency, or environmental sustainability.
Amid this backdrop, investors looking to invest might consider buying three specialty chemicals stocks, Kuraray Co., Ltd. (KURRY), Arkema S.A. (ARKAY), and Kronos Worldwide, Inc. (KRO), which are shifting toward more specialized industrial processes for potential growth.
Innovation in product development is the key driver in this space. Companies are investing heavily in research and development to create novel formulations that meet the evolving needs of sectors such as automotive, healthcare, electronics, and construction, which are leading them to command premium prices compared to standard commodities.
Moreover, with a growing emphasis on sustainability, specialty chemical companies are developing eco-friendly products that help customers reduce their environmental footprint while maintaining high performance.
The drive towards decarbonization may be influenced by several factors, but here are three key elements for 2025: availability of round-the-clock, cost-effective clean energy, policy changes, and capacity of chemical companies to harness value across ecosystems to bolster sustainable investments.
Also, the global specialty chemicals market is anticipated to reach $914.4 billion by 2030, exhibiting a CAGR of 5.2%.
Considering these encouraging trends, let’s delve into the fundamentals of the three Chemicals industry stocks, beginning with the third pick.
Stock #3: Kuraray Co., Ltd. (KURRY)
Headquartered in Tokyo, Japan, KURRY engages in the production and sale of resins, chemicals, fibers, activated carbon, and high-performance membranes and systems worldwide. The company operates through five segments: Vinyl Acetate; Isoprene; Functional Materials; Fibers; and Trading.
In terms of forward EV/Sales, KURRY is trading at 0.88x, 48.4% lower than the industry average of 1.70x. Likewise, the stock’s forward EV/EBITDA and Price/Sales multiples of 3.92 and 0.72 are 53.7% and 45.6% lower than their respective industry averages of 8.47 and 1.32.
In the fiscal year 2024, which ended December 31, 2024, KURRY’s net sales increased 5.9% year-over-year to ¥826.89 billion ($5.44 billion). Its operating income was ¥85.08 billion ($560.15 million), up 12.7% from the year-ago value. The company’s attributable net income came in at ¥31.72 billion ($208.86 million).
Street expects KURRY’s revenue for the first quarter (ending March 2025) to increase 228% year-over-year to $5.69 billion.
The stock has gained 17.2% over the past year to close the last trading session at $36.40.
KURRY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
KURRY has a B grade for Value, Stability, and Quality. It is ranked #23 out of 83 stocks in the B-rated Chemicals industry. Click here to see the additional ratings for KURRY (Growth, Momentum, and Sentiment).
Stock #2: Arkema S.A. (ARKAY)
Based in Colombes, France, ARKAY is a chemical producer that manufactures and sells specialty chemicals and advanced materials internationally. The company operates in three segments: Adhesive Solution; Advanced Materials and Coating Solutions; and Intermediates.
On December 2, ARKAY announced the finalization of the acquisition of Dow’s flexible packaging laminating adhesives business, one of the leading global producers of adhesives for the flexible packaging market. This step will enable Bostik to ideally complement its existing commercial presence, product offering, and technological breadth for flexible packaging and help ARKAY expand its portfolio.
In terms of forward non-GAAP P/E, ARKAY is trading at 10.99x, 30.2% lower than the industry average of 15.74x. Likewise, the stock’s forward EV/Sales and Price/Cash Flow multiples of 0.94 and 6.09 are 44.7% and 31.2% lower than the industry averages of 1.70x and 8.86x, respectively.
During the fiscal third quarter, which ended on September 30, 2024, ARKAY’s sales increased 2.9% year-over-year, amounting to €2.39 billion ($2.50 billion). The company posted an operating income of €184 million ($192.39 million), indicating marginal growth from the prior year’s quarter. ARKAY’s net income stood at €120 million ($125.47 million) and €1.42, reflecting increases of 2.6% and 3.6% year-over-year. Also, its EBITDA amounted to €407 million ($425.56 million), up 5.4% year-over-year.
Analysts expect ARKAY’s revenue and EPS for the fiscal year (ended December 2024) to be $9.95 billion and $7.96, respectively. For the fiscal year 2025, its revenue is expected to increase 5.9% year-over-year to $10.53 billion, while its EPS is forecasted to settle at $8.45, indicating a 6.2% improvement over the prior year.
Over the past month, the stock has surged 13.3%, closing the last trading session at $87.45. It also soared 15.3% year-to-date.
It’s no surprise that ARKAY has an overall rating of B, which equates to a Buy in our POWR Ratings system. It has a B grade for Growth, Value, and Stability. Out of 83 stocks in the same B-rated industry, ARKAY is ranked #15.
Beyond what is stated above, we’ve also rated ARKAY for Momentum, Sentiment, and Quality. Get all ARKAY ratings here.
Stock #1: Kronos Worldwide, Inc. (KRO)
KRO is a global producer and marketer of value-added titanium dioxide pigments, or TiO2, a base industrial product used in a wide range of applications. These pigments are used in coatings, plastics, paper, and specialty products like inks, cosmetics, and pharmaceuticals. The company offers over 50 different TiO2 pigment grades and manufactures iron-based chemicals and specialty chemicals.
In terms of forward EV/Sales, KRO is trading at 0.74x, which is 56.5% lower than the industry average of 1.70x. The stock’s forward Price/Sales ratio of 0.51x is 61.5% below the industry average of 1.32x. Also, its forward EV/EBITDA multiple of 7.69 compares to the industry average of 8.47x.
For the third quarter of 2024, which ended on September 28, KRO's net sales amounted to $484.70 million, up 22.1% year-over-year. Its EBITDA came in at $123.3 million compared to the year-ago net loss of $12.7 million. The company’s net income stood at $71.80 million compared to the prior-year quarter’s loss of $20.4 million, while its EPS came in at $0.62 versus a loss of $0.18 per share last year.
The consensus revenue estimate of $494.19 million for the fiscal first quarter (ending March 2025) represents a 23.5% increase year-over-year. The consensus EPS estimate of $0.13 for the same quarter indicates a 115% improvement year-over-year.
Shares of KRO gained 3.5% over the past year to close the last trading session at $9.15.
KRO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Growth and Sentiment and a B for Value. Within the same Chemicals industry, it is ranked #11. Click here to see KRO’s ratings for Momentum, Stability, and Quality.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
ARKAY shares were trading at $83.14 per share on Wednesday afternoon, down $4.31 (-4.93%). Year-to-date, ARKAY has gained 9.65%, versus a 4.54% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
