Dow Inc.

Methodology

Dow's commodity chemical business exhibits extreme earnings cyclicality tied to supply-demand balances, feedstock costs, and global industrial production. The company can swing from peak profitability to losses within chemical cycles. Fair value calculations require mid-cycle margin assumptions and normalized spreads rather than spot chemical pricing conditions.

Methodology

Dow trades at very low PEG ratios (often below 0.5x) during strong chemical cycles, reflecting market anticipation of inevitable margin compression and earnings declines. Commodity chemical growth comes from capacity additions industry-wide rather than company-specific advantages. PEG misleads for commodity chemicals because short-term earnings growth during upswings doesn't reflect sustainable business economics.

Methodology

Dow pays a dividend yielding 4-6% that provides downside support during weak chemical cycles, making PEGY significantly more attractive than PEG. The company prioritizes dividend sustainability even when earnings decline. Total return for commodity chemicals relies heavily on yield component given minimal long-term earnings growth from mature, cyclical markets.