You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
After experiencing some of the worst that capitalism has to offer, Nalco (symbol NLC) is finally ready to thrive, says Citigroup analyst P.J. Juvekar, who just upgraded the stock to a "buy." Nalco, the largest provider of water treatment and other chemical services that improve industrial processing, was taken private in 2003 and went public again in 2004.
The stock has gone nowhere since then for several good reasons. Nalco has $3.25 billion in debt -- giving it a debt-to-equity ratio of nearly five. But not much of that debt matures until 2010, and Nalco's cash flow should enable it to meet its interest obligations, Juvekar says. Another problem: The private equity investors who took the company private still own a big chunk of the stock. Juvekar thinks few will hang on for the long term, and their selling will depress the stock's price. Finally, Nalco has a pension plan that's $434 million underfunded.
But Nalco runs great businesses. As a maker of specialized chemicals, it uses a lot of energy, but it's increasingly able to pass along higher energy costs -- and increase prices even further, Juvekar says. A huge team of scientists -- the company owns more than 2,000 patents -- makes Nalco's services invaluable. More than two-thirds of the companies in Standard & Poor's 500-stock index do business with Nalco. What's more, those clients stay put: Fifteen of Nalco's biggest 20 clients have been with the company for more than ten years.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The reason: Whether it's chemicals that help control corrosion in water pipes or that make paper plants more efficient, Nalco saves its clients big bucks. Generally, Nalco employees are stationed at its client's plants, but Juvekar says a new service enables Nalco to monitor plants -- and adjust chemical mixes -- remotely. He also believes that Nalco will benefit from plans to sell more of its services to smaller companies. For all these reasons, he thinks Nalco will be able to raise prices far more aggressively than do other analysts. Higher prices would mean higher profit margins and fatter earnings.
Based on a share price of $18, Nalco sells for 27 times Juvekar's 2006 earnings estimate of 67 cents per share. Other analysts are forecasting about the same earnings for this year, according to Thomson First Call. But Juvekar expects earnings to jump to $1.28 per share next year, while the average analyst foresees earnings of just 95 cents. Juvekar bases his estimate on computer modeling done after recent conversations with Nalco's chief executive, Bill Joyce, and its chief operating officer, Bill Roe. Nalco trades at just 14 times Juvekar's '07 profit forecast. Juvekar estimates that Nalco's earnings will grow 10% annually over the next five years.
--Steven Goldberg
-
Betting on Super Bowl 2026? New IRS Tax Changes Could Cost YouTaxable Income When Super Bowl LX hype fades, some fans may be surprised to learn that sports betting tax rules have shifted.
-
How Much It Costs to Host a Super Bowl Party in 2026Hosting a Super Bowl party in 2026 could cost you. Here's a breakdown of food, drink and entertainment costs — plus ways to save.
-
3 Reasons to Use a 5-Year CD As You Approach RetirementA five-year CD can help you reach other milestones as you approach retirement.
-
If You'd Put $1,000 Into AMD Stock 20 Years Ago, Here's What You'd Have TodayAdvanced Micro Devices stock is soaring thanks to AI, but as a buy-and-hold bet, it's been a market laggard.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
