The coronavirus pandemic caused a stock market crash in the UK with the FTSE 100 falling sharply in March and still trading nearly 20% off its year’s high.
But it seems no one told investors in Croda International (LSE: CRDA). The share price closed on Thursday night fractionally above 5,700p at an all time high. This is despite posting a fall in first-half profit and revenue.
So, what is making this share seemingly immune from the stock market crash and the coronavirus pandemic? Let’s take a closer look.
Stock market crash: How is trading?
The FTSE 100 constituent is split into four markets: personal care, life sciences, performance technologies, and industrial chemicals.
Performance technologies is coatings, polymers, lubricants, and additives. Life sciences is disease prevention, crop management, health care, and seed protection. And personal care is beauty products, vaccines, and drug delivery.
Ultimately Croda is a specialist chemicals company, which is a regulated area. This affords a degree of protection from competitors. But it doesn’t make the company immune from the stock market crash.
In financial results for the first six months, revenue declined 5.8% and pre-tax profit 12.8% versus the same period last year.
Industrial chemicals performed poorly in the first half of the year with sales tanking 17.3%. But sales were down across the board. Personal care declined 8.1%, performance technologies 4.6%, and life sciences 0.8%.
Worryingly, the firm also announced that although trading had stabilised, future revenue recovery was unclear.
Trading on past glories?
Croda has an impressive history. An investment in July 2010 would have returned 550%. The company is one of only 14 left in the FTSE 100 to increase its dividend for 10 years in a row.
While a dividend yield of 1.58% is not huge, if you had held that same investment from July 2010, the dividend would now yield 8.7%.
The company announced on Thursday that the interim dividend would be held at 39.5p. This keeps alive the hope of another year of dividend growth. Croda also regularly issues special dividends, although that is less likely this year.
To complement organic growth, there is a history of acquisitions. Earlier this month, its life sciences sector bought Avanti, which specialises in high-purity polar lipids, for $260m. These are used in next-generation drug vaccines.
Immune from the stock market crash?
My Foolish colleague Michael Baxter sees potential in Croda’s life sciences division. And the firm has a strong balance sheet. This is important in tough economic trading conditions. But I see a lot of growth already priced in here.
After falling sharply in March, the share price has been on a charge, and the price-to-earnings ratio is now topping 30. This looks expensive to me for a company whose revenue and profit have been flat since 2017. First-half financials were hardly encouraging either, with profit falling in every division.
The resilience from the stock market crash is impressive, but personally I’m failing to see why. I think there is considerable downside if earnings targets are missed or if the dividend growth run comes to an end later this year. I’m looking elsewhere for investments.
