Hook & thesis
Huntsman Corporation is a cyclical chemical manufacturer that currently offers a rare combination for value-oriented investors: sub-1x price-to-book, a market cap near $2.2 billion and recurring free cash flow. At $12.69 per share HUN looks cheap on headline multiples (price-to-sales ~0.39, price-to-free-cash-flow ~19, price-to-cash-flow ~7.6) while still generating roughly $116 million in free cash flow annually. That cash flow supports a meaningful cash dividend and gives management options to de-lever or invest in higher-margin specialty products.
My thesis: buy HUN for a long-term recovery trade that captures multiple expansion and earnings normalization across Huntsman's polyurethane, performance products and advanced materials segments. The entry below reflects current technical levels and recent volatility; targets assume a return toward cycle highs and valuation re-rating as margins improve.
What Huntsman does and why it matters
Huntsman manufactures differentiated organic chemicals used across industries: polyurethanes (MDI, polyols, polyurethanes intermediates), Performance Products (amines, surfactants, LAB) and Advanced Materials (epoxy resins and specialty polymers). These products feed into end markets such as automotive, construction, electronics, coatings and personal care. Demand is driven by industrial activity, automotive cycles and sector-specific growth (for example TPU in footwear and EV components).
The market should care because Huntsman sits where commodity cycles and specialty growth intersect. When industrial demand recovers or margins in specialty TPU/epoxy rise, Huntsman’s scale and product mix allow profit leverage. Conversely, the downside is cushioned by a sub-1x P/B and a dividend that returns capital to investors while the business stabilizes.
Data-backed fundamentals and valuation frame
| Metric | Value |
|---|---|
| Current price | $12.69 |
| Market cap | $2.24B |
| Price-to-book | ~0.8x |
| Price-to-sales | ~0.39x |
| EV / EBITDA | ~14.3x |
| Free cash flow (trailing) | $116M |
| Dividend | $0.0875 per share (payable 03/31/2026) |
| Dividend yield | ~6.25% |
| Net leverage (debt/equity) | ~0.73 |
| 52-week range | $7.30 - $18.53 |
The headline multiples show deep value: price-to-sales near 0.4x and P/B comfortably below 1x. Free cash flow of roughly $116 million versus a market cap of about $2.24 billion implies an FCF yield in the mid-single digits today, with upside if margins recover. Enterprise value (~$3.79B) to sales (~0.67x) and EV/EBITDA (~14.3x) indicate the market is partially pricing in recovery but not full margin normalization to prior cycle peaks.
Operational signs and technical context
Technically, HUN is neither overheated nor deeply oversold: 10-day SMA sits near $13.23, 20-day SMA around $12.55 and the 50-day SMA near $11.42. RSI is neutral at ~52.6 and MACD shows slightly bearish momentum. Volume profiles indicate average daily liquidity around 6.4M shares, which is adequate for trade execution. Short interest has ticked up to roughly 21.7M shares recently, giving a days-to-cover near 4; that can amplify moves in either direction if fundamentals surprise.
Catalysts to own the name
- Dividend continuation and shareholder support: management declared a $0.0875/share cash dividend payable 03/31/2026 (record 03/13/2026), which both signals cash generation and provides income to holders.
- End-market demand recovery: a pickup in automotive, construction and electronics would lift polyurethanes and epoxy margins and drive earnings leverage.
- Specialty product growth: long-term tailwinds in TPU, ethylene carbonate for EV battery electrolytes and amines for water treatment create higher-margin growth opportunities.
- Multiple expansion: re-rating from sub-1x P/B and ~0.4x P/S to more normalized industry multiples as earnings recover.
Trade plan (actionable)
Entry: Buy at $12.70. This is a rounded execution level near the current price to allow for intraday slippage.
Stop-loss: $10.50. A break below $10.50 signals a failure to hold the recent consolidation band and would suggest downside to the low-$7s becomes more likely.
Target: $18.50. This target corresponds to a re-test of the 52-week high area and assumes earnings/margins re-normalize over the next year.
Expected trade duration:
- Short term (10 trading days): use $12.70 entry primarily as an opportunistic starter. In the first 10 trading days expect volatility; a quick bounce to the $14 area would be a reasonable early outcome if market sentiment improves.
- Mid term (45 trading days): this window tests whether improving industry indicators translate into margin expansion. Exiting or trimming into strength near $15-$16 within 45 trading days is prudent if you prioritize de-risking.
- Long term (180 trading days): hold to $18.50 target as margins and EPS normalize. The full thesis rests on earnings recovery and multiple re-rating, which typically takes several quarters in industrial chemicals.
Risks and counterarguments
- Macro cyclicality: Huntsman is exposed to industrial cycles. A weaker industrial environment or prolonged slowdown in automotive or construction would keep margins depressed and could push the stock lower toward prior lows.
- Commodity feedstock swings: Raw material price volatility (e.g., oil and derivatives used to make polyols, MDI inputs) can compress margins quickly and unpredictably.
- Balance sheet & leverage: While debt-to-equity near 0.73 is manageable, a prolonged earnings slump could strain liquidity and force asset sales or dividend reductions.
- Execution risk on specialty pivot: Moving up the value chain into higher-margin TPUs and specialty resins requires capital and execution. Failure to capture premium pricing would limit upside.
- Short interest amplification: Short interest near 21.7M shares presents the risk of amplified downside if negative news triggers a cascade; conversely it can fuel rallies on positive surprises.
Counterargument - Some investors will argue the negative trailing earnings (EPS around -$1.63) and negative returns on equity indicate deeper structural issues that merit staying on the sidelines until more definitive margin stabilization. That is a reasonable stance: if you are unwilling to tolerate near-term EPS volatility, waiting for a quarter or two of consistent positive EPS or clearer margin improvement is prudent.
What would change my mind
I would become more cautious if Huntsman announced any of the following: a dividend cut or suspension, a material acquisition that increases leverage without clear synergy realization, or a sequence of quarters showing cash flow deterioration below current levels. Conversely, a sustained improvement in core segment margins, a meaningful reduction in net leverage or evidence that specialty products are contributing higher-margin revenue would reinforce the bullish case and push me to increase exposure.
Conclusion
Huntsman looks like a compelling long-term value trade today. The valuation is attractive, free cash flow exists to support the $0.0875 dividend and the company participates in several end-markets with secular growth potential. The trade is not without risk - cyclical earnings, feedstock exposure and execution are real concerns - but with an entry at $12.70, a stop at $10.50 and a target of $18.50, the reward-to-risk is favorable for investors comfortable with chemical cyclicality and a 180-trading-day horizon.
Key monitoring points
- Quarterly margin trends in Polyurethanes and Advanced Materials.
- Management commentary on capital allocation, dividend policy and leverage targets.
- Industrial end-market indicators for automotive, construction and electronics demand.
- Raw material price trajectory and any meaningful change in input-cost pass-through dynamics.
Trade idea: Long HUN at $12.70, stop $10.50, target $18.50. Time the holding period to 180 trading days for the highest probability of the thesis playing out.