A Different Chase

When most people hear or read ‘Chase Corporation’, they immediately think bank with lots of tellers and ATMs.  It is also the name of a specialty chemicals producer based in Massachusetts.  This Chase  is all about materials used in adhesives and tapes, sealants and waterproofing, chemical additives and industrial tapes.  The company may not be a household name in its own right, but its financial performance sets it apart from other small-cap companies in the basic materials sector.  The company’s return on investment based on the trailing twelve months ending mid-2021 is 11.9%, putting it among the most successful in the group.

Chase is a small company, ringing in $279.1 million in total sales in the twelve months ending May 2021.  Most of its products are small ticket items that it sells in high volume.  In the last few quarters demand for adhesives and sealants particularly from international customers was a key top-line driver.  That said, acquired operations also contributed to sales in recent quarters.  The company’s expanded product line includes products aimed at leading edge markets such as 5G communications, electric vehicles and Internet of Things (IoT) technologies.

 

The company extracted a 15.5% profit margin on its sales and converted 20% of each sales dollar to operating cash flow.  The impressive performance was due in part to a recent attempt to gain operational efficiency.  To that end production at a plant in California was moved to a lower cost environment in North Carolina.  Additionally, an adhesives manufacturing facility in Massachusetts was shuttered and production activities were squeezed into a facility in Pennsylvania.     

The ample operating cash flow generation helped top off the bank account at $102.9 million.    Debt totals a modest $9.2 million, so net debt is zero.  If there is any doubt that this Chase has a strong balance sheet, investors should also note that the current ratio is 7.2 times.  That strength should inspire investors confidence in the company’s dividend, which is expected to be $0.80 over the next year.  This implies a 0.70% forward dividend yield.

Chase trades under the symbol CCF on the NYSE American exchange.  Average daily trading volume is a modest 23,000 shares per day.     The equally modest trading volume may stem from flotation. Insiders own just over a fifth of the company, leaving just 7.6 million shares of common stock as the company’s common stock flotation.  It may not be the flotation alone that is driving trading volume.  The shares trade at a price well over $100 per share, putting a big price tag over $10,000 for just one round lot. 

With shallow trading volume it may be challenging to build significant long positions in Chase the specialty chemical company, but not impossible.  It may be worth it to try.  So far this year the stock has returned 14.9% growth plus a 0.6% dividend yield. 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.