With crude prices falling and the share prices for Big Oil companies such as Occidental Petroleum (NYSE: OXY) and Chevron Corporation (NYSE: CVX) off, down also are the share prices for biofuel firms such as FutureFuel Corp. (NYSE:FF).
FutureFuel Corp operates a facility that was converted to a biofuels and biobased chemicals platform. The feedstock for biodiesel is used cooking oil, tallow and algae. The chemicals include custom manufactured products (a bleach activator, a herbicide and materials for a lithium-ion battery) and polymer modifiers and other chemicals sold to multiple customers. Unlike many in the alternative energy sector, FutureFuel Corp has a very attractive balance sheet and income statement.
First of all, there is plenty of cash. FutureFuel is around $10 a share and there is almost $4 a share in cash. Buttressing that is no debt on the balance sheet.
On a quarterly basis, both sales and earnings are rising. Sales growth is up by 55% on a quarterly basis. On the same standard, earnings-per-share growth has risen 153.29%. Over the past five years, earnings-per-share growth is higher by 58.12%. The price-to-earnings ratio is around 10.
There are many other solid indicators. FutureFuel Corp is profitable with a double digit margin. The returns on equity, margin and investment are solid, too. Another very positive sign is that insiders own over 50% of the stock of FutureFuel Cop.
FutureFuel Corp has a dividend of around 4%. The average dividend for a stock on the Standard Poor’s 500 Index (NYSE: SPY) is around 2%. It is also higher than the dividend of Occidental Petroleum or Chevron Corp.
The dividend income component is very important for an equity. As legendary investor John Neff, founder of the Vanguard group of mutal funds, points out in his book, “Enough,’ “..from 1900 through 2007 the calculated annual total return on stocks averaged 9.5 percent, composed entirely of investment return, roughly 4.5 percent from the average dividend yield and 5.0 percent from earnings growth.” In addition to the dividend return being above average, the payout ratio for FutureFuel Corp is below average. That means there is plenty of cash
Now trading around $10 a share, the mean analyst target price for FutureFuel Corp. over the next year is $16.00. While up for the last week and month of market action, FutureFuel Corp is down 16.82% for 2012. The mean analyst rating of 1 is the highest possible and very bullish.