Based in Rotterdam, The Netherlands, LyondellBasell Industries (LYB) is one of the largest plastics, chemicals and refining companies in the world. Lyondell produces and markets olefins and other petroleum-based products. These include ethylene and ethylene components, which are used in many segments of the economy, including the manufacture of consumer goods; packaging, housing and automotive components; and other durable and nondurable goods. Lyondell’s refining segment is a significant producer of gasoline and diesel fuel and gasoline blending components.

Falling oil prices negatively impacted sales and earnings during the past two years. Future results will be aided by increasing global demand for petrochemicals and more favorable raw material costs from a projected increase in the U.S. natural gas supply. LyondellBasell’s capital expenditure program will also help to drive EPS growth from investments in high return projects. Management also expects to realize additional gains through cost cuts and operational improvements.

Sales will likely increase 6% and EPS will rise 1% to $9.90 in 2017. A pickup in the U.S. economy, increased infrastructure spending and the possibility of lower corporate tax rates could enable sales and earnings to grow much more rapidly. At 8.5 times current EPS, LYB shares are clearly undervalued. The company’s stout cash flow has enabled management to shape up the balance sheet after LyondellBasell’s emergence from bankruptcy in 2010. Buy.

Industry: Materials–Commodity & Chemicals; P/E = 9.5; P/D = 26.8

LyondellBasell Industries NV (LYB: Current Price 91.16), based in Rotterdam, The Netherlands, is one of the largest plastics, chemicals and refining companies in the world. Lyondell produces and markets olefins and other petroleum-based products. Lyondell’s refining segment is a significant producer of gasoline, diesel fuel and gasoline blending components.

Falling oil prices negatively impacted sales and earnings during the past two years. Future results will be aided by increasing global demand for petrochemicals, and more favorable raw material costs from a projected increase in U.S. natural gas supply. LyondellBasell’s capital expenditure program will also help to drive EPS growth from investments in high return projects.

Sales will likely increase 6% and EPS will rise 1% to $9.90 in 2017. A pickup in the U.S. economy, increased infrastructure spending and the possibility of lower corporate tax rates could enable sales and earnings to grow much more rapidly. At 9.3 times current EPS and 26.8 times dividends (3.7% yield), LYB is clearly undervalued. The company’s stout cash flow has enabled management to shape up the balance sheet after LyondellBasell’s emergence from bankruptcy in 2010.

I expect LYB to advance 31% to my Min Sell Price of 118.93 within two years. Buy at the current price.