Cabot (CBT) Valuation After Weaker First Quarter Earnings And Recent Share Price Momentum

Simply Wall St.02-17

Cabot (CBT) shares are under the microscope after the company reported first quarter results, showing sales of US$849 million and net income of US$73 million, both lower than in the same period a year...

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See our latest analysis for Cabot. Despite the softer quarterly numbers, Cabot's 30 day share price return of 7.43% and 90 day share price return of 27.49% suggest momentum has been building, even though the 1 year total shareholder return of an 11.71% decline shows a weaker longer term picture. If this earnings update has you rethinking where materials and industrial names fit in your portfolio, it could be a good moment to broaden your search with 23 top founder-led companies. With earnings and revenue softer than last year, but the shares trading at about an 18% discount to an estimated intrinsic value, is Cabot quietly offering a margin of safety here, or is the market already pricing in future growth? AdvertisementPreferred P/E of 13x: Is it justified? Cabot is trading on a P/E of 13x, while its shares last closed at $76.19, and that earnings multiple looks low against both peers and the wider chemicals group. The P/E ratio compares the share price to earnings per share, so a lower P/E can suggest the market is placing a lower value on each dollar of current earnings. For a specialty chemicals and performance materials business like Cabot, this matters because earnings quality, returns on capital and balance sheet risk all shape how much investors are willing to pay. Here, the data points in a few directions at once. Cabot is flagged as having high quality earnings and a high return on equity of 20.5%, and it has moved from loss making to profitable over the past 5 years with strong earnings growth over that period. At the same time, earnings declined by 26.6% over the last year, profit margins compressed from 10.4% to 8.5%, the company carries a high level of debt, and analysts have a target price of $74.80, which is slightly below the current share price. Relative to peers, the gap is clear. Cabot’s 13x P/E is described as good value compared both to its peer average of 26x and the broader US chemicals industry average of 26.8x. This suggests the market is valuing its earnings at roughly half the level of comparable companies. With no fair ratio available, there is no additional regression based anchor indicating where that multiple could trend over time, so investors are left weighing the contrast between strong return on equity and long term profit improvement on one hand, and the recent earnings decline and debt profile on the other. See what the numbers say about this price — find out in our valuation breakdown. Result: Price-to-Earnings of 13x (UNDERVALUED) However, a 26.6% earnings decline and high debt levels could keep pressure on the P/E, especially if profit margins remain around 8.5% or decline further. Find out about the key risks to this Cabot narrative. Another Lens: DCF Says the Discount Is Bigger If the 13x P/E hints at value, our DCF model pushes that further, with an estimated future cash flow value of $93.38 against a $76.19 share price. That 18.4% gap points to a deeper discount. Is it compensation for debt and recent earnings pressure, or an opening for patient investors? Look into how the SWS DCF model arrives at its fair value. CBT Discounted Cash Flow as at Feb 2026Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Cabot for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. Next Steps If this mix of strengths and concerns leaves you on the fence, take a closer look at the full picture now and weigh both sides for yourself. You can see exactly how the balance of risks and rewards stacks up in 2 key rewards and 1 important warning sign. Looking for more investment ideas? If Cabot has sharpened your thinking, do not stop here. Broaden your watchlist with a few focused stock ideas that match the kind of portfolio you want to build.  Zero in on quality at a discount by checking companies in our 55 high quality undervalued stocks that pair fundamentals with appealing valuations. Strengthen your income stream by reviewing the 13 dividend fortresses, where yields start above 5% and balance sheet resilience is a key filter. Reduce portfolio stress by scanning the 82 resilient stocks with low risk scores, highlighting companies with lower risk scores that may help steady overall returns.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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