Stepan Company (SCL) | Investment Case

1. Company Snapshot

1.a. Company Description

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products.It operates through three segments: Surfactants, Polymers, and Specialty Products.The Surfactants segment offers surfactants that are used as principal ingredients in consumer and industrial cleaning products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients.

Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites.The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products.The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications.

It serves in the United States, France, Poland, the United Kingdom, Brazil, Mexico, and internationally.Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

Show Full description

1.b. Last Insights on SCL

Recent negative drivers behind Stepan Company's performance include: * Underperformance and volatility in the specialty chemicals market, particularly in the surfactants segment. * Current earnings and macro pressures persist, despite improved fundamentals with reduced CapEx and positive FCF. * Uncertainty around the timing of earnings recovery, tied to market diversification and growth potential. * No clear indication of a likely earnings beat in the recent earnings release, with quarterly earnings of $1.03 per share beating the Zacks Consensus Estimate of $0.64 per share, but not necessarily a positive surprise given the company's recent performance. * No significant share buyback activity mentioned in recent news, which could have been a positive catalyst for the stock.

1.c. Company Highlights

Last Price	45.16
Change Percentage	0.33%
Open	44.81
Previous Close	45.01
Market Cap ( Millions)	1021
Volume	88273
Year High	77.76
Year Low	41.82
M A 50	45.4
M A 200	51.63

FCF Yield	11.75%
Dividend Yield	3.43%
ROE	3.72%
Debt / Equity	28.64%
Net Debt / EBIDTA	119.44%
Price To Book	0.83
Price Earnings Ratio	22.83
Price To FCF	8.51
Price To sales	0.44
EV / EBITDA	6.31

2. Stepan Company Delivers Mixed Q3 2025 Results

Stepan Company reported adjusted net income of $10.9 million or $0.48 per diluted share for Q3 2025, significantly lower than the $23.7 million or $1.03 per diluted share in the same period last year. However, the EPS beat analyst estimates of $0.36. Consolidated adjusted EBITDA increased by 6% to $56 million, driven by strong specialty product results and the non-recurrence of expenses associated with the external criminal social engineering fraud event in 2024. Total company sales volumes grew 1%, with Polymers up 8% and NCT product line up 26%, while Surfactants volume declined 2%.

Publication Date: Nov -24

                                    📋 Highlights
                                    Adjusted EBITDA Growth:
                                                Year-to-date adjusted EBITDA reached $165 million (+9%), with Q3 at $56 million (+6% YoY), driven by Specialty Products' strong performance.
Raw Material Cost Impact:
                                                Surfactant margins pressured by 70% higher coconut oil prices (avg. $2,500/ton in 2025 vs. $1,500 in 2024) and new Pasadena facility costs.
Volume Growth Segments:
                                                Polymers (+8% volumes) and NCT (+26%) outperformed, while Surfactants (-2% volumes) faced soft consumer product demand and margin compression.
Tax and Earnings Decline:
                                                Q3 adjusted net income fell 54% to $0.48/share due to higher U.S. tax rates, reduced capitalized interest, and depreciation from new assets.
Free Cash Flow Strength:
                                                $40.2 million free cash flow generated in Q3, driven by $69.8 million in operating cash flow and working capital reductions.

                                

Segment Performance

The Polymers segment delivered volume growth across rigid polyols and commodity PA, while EBITDA was slightly lower due to unfavorable mix and margin pressures. The Surfactants segment, on the other hand, experienced a decline in adjusted EBITDA due to higher Pasadena start-up costs, oleochemical raw material cost inflation, and lower demand within the global commodity consumer products end market. Specialty Products adjusted EBITDA increased significantly, driven by favorable order timing within the pharmaceutical business.

Cash Flow and Balance Sheet

Cash from operations was $69.8 million for the quarter, and free cash flow was positive at $40.2 million, driven by reductions in working capital. The company's ability to generate cash is a positive sign, and the free cash flow yield of 12.02% indicates a decent return for investors.

Outlook and Valuation

Analysts estimate next year's revenue growth at 8.1%. With a current P/E Ratio of 22.31 and EV/EBITDA of 6.19, the market is pricing in a moderate growth expectation. The company's ROE of 3.72% and ROIC of 3.47% indicate a relatively low return on equity and invested capital. As Luis Rojo mentioned, "Our customer will always remain at the center of our strategy and innovation efforts," which suggests that the company is focused on delivering value to its customers and shareholders.

Dividend Yield and Conclusion

3. NewsRoom

Stepan Announces Agreement to Sell Lake Providence, LA Assets

Dec -03

Source: prnewswire.com

SCL Wraps Up Subsidiary Divestment, Core Operations Enhanced

Nov -25

Source: zacks.com

Stepan Company Completes Sale of Philippine Assets, Advancing Strategic Focus on Core Growth

Nov -20

Source: prnewswire.com

Stepan Company's Plunge Makes No Sense

Nov -17

Source: seekingalpha.com

Buy 3 Ideal Dividend Kings Of 24 'Safer' In November's 56

Nov -10

Source: seekingalpha.com

D.A. Davidson & CO. Invests $378,000 in Stepan Company $SCL

Oct -31

Source: defenseworld.net

Stepan Company (SCL) Q3 2025 Earnings Call Transcript

Oct -29

Source: seekingalpha.com

Stepan Co. (SCL) Q3 Earnings and Revenues Surpass Estimates

Oct -29

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.61%)

6. Segments

Surfactants

Expected Growth: 6.5%

Stepan Company's 6.5% growth in Surfactants is driven by increasing demand for personal care products, rising adoption of eco-friendly and sustainable surfactants, and growing use in industrial applications such as oilfield chemicals and lubricants. Additionally, strategic acquisitions and expansion into emerging markets have contributed to the company's growth.

Polymers

Expected Growth: 6.8%

Stepan Company's 6.8% growth in Polymers is driven by increasing demand for sustainable and eco-friendly products, expansion in the construction and automotive industries, and strategic investments in R&D to develop innovative polymer solutions. Additionally, the company's focus on operational efficiency and cost savings initiatives have contributed to the growth.

Specialty Products

Expected Growth: 7.2%

Stepan Company's Specialty Products segment growth of 7.2% is driven by increasing demand for natural and sustainable ingredients in personal care and food products, expansion into emerging markets, and strategic acquisitions. Additionally, the company's focus on innovation and R&D investments in high-growth areas such as natural oils and bio-based products also contribute to the segment's growth.

7. Detailed Products

Surfactants

Stepan Company's surfactants are a class of specialty chemicals used in a wide range of applications, including personal care, household cleaning, and industrial processes.

Polyurethane Polyols

Stepan Company's polyurethane polyols are used in the production of flexible and rigid foam, coatings, adhesives, and sealants.

Specialty Esters

Stepan Company's specialty esters are used in a variety of applications, including personal care, pharmaceuticals, and industrial processes.

Amphoteric Surfactants

Stepan Company's amphoteric surfactants are used in personal care products, such as shampoos, conditioners, and body washes.

Quaternary Compounds

Stepan Company's quaternary compounds are used in a variety of applications, including personal care, pharmaceuticals, and industrial processes.

8. Stepan Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Stepan Company is moderate due to the presence of alternative products in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the large number of customers and the availability of alternative products.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's large size and negotiating power.

Threat Of New Entrants

The threat of new entrants is moderate due to the moderate barriers to entry and the availability of resources.

Intensity Of Rivalry

The intensity of rivalry is high due to the large number of competitors and the high stakes in the market.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	35.44%
Debt Cost	4.87%
Equity Weight	64.56%
Equity Cost	8.11%
WACC	6.96%
Leverage	54.90%

11. Quality Control: Stepan Company passed 2 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Ecovys

A-Score: 5.3/10

Value: 7.3

Growth: 3.3

Quality: 2.6

Yield: 5.0

Momentum: 8.0

Volatility: 5.3

1-Year Total Return ->

Core Molding Technologies

A-Score: 5.2/10

Value: 7.2

Growth: 5.9

Quality: 5.3

Yield: 0.0

Momentum: 7.0

Volatility: 5.7

1-Year Total Return ->

Perimeter Solutions

A-Score: 4.8/10

Value: 3.8

Growth: 6.8

Quality: 6.0

Yield: 0.0

Momentum: 8.5

Volatility: 3.7

1-Year Total Return ->

Stepan

A-Score: 4.3/10

Value: 6.2

Growth: 3.3

Quality: 3.9

Yield: 4.0

Momentum: 1.0

Volatility: 7.3

1-Year Total Return ->

Ingevity

A-Score: 4.1/10

Value: 6.3

Growth: 2.0

Quality: 3.5

Yield: 0.0

Momentum: 9.0

Volatility: 4.0

1-Year Total Return ->

Koppers

A-Score: 3.8/10

Value: 6.7

Growth: 4.8

Quality: 2.7

Yield: 1.0

Momentum: 2.0

Volatility: 5.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

9.38%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.96%

Stepan Company - US8585861003

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SCL

1.c. Company Highlights

Less Volatile

Stable Momentum

Fairly Valued

Earnings Beats

Revenues Miss

Earnings Miss

Expensive

Average Quality

Revenues Beats

Weak Momentum

Average Growth

Medium Volatility

Average Yield

2. Stepan Company Delivers Mixed Q3 2025 Results

Segment Performance

Cash Flow and Balance Sheet

Outlook and Valuation

Dividend Yield and Conclusion

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.61%)

6. Segments

Surfactants

Expected Growth: 6.5%

Polymers

Expected Growth: 6.8%

Specialty Products

Expected Growth: 7.2%

7. Detailed Products

Surfactants

Polyurethane Polyols

Specialty Esters

Amphoteric Surfactants

Quaternary Compounds

8. Stepan Company's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Stepan Company passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

45.16$

Current Price

45.16$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA