[ad_1]
The FTSE 100 is up 20% in 2025, but not all stocks have shared in the rally. One in particular has had a miserable year, adding to a 71% drop from its late-2021 peak. As a long-term value investor though, Iâm increasingly intrigued by the potential opportunity this presents.
Improving fundamentals
The stock in question is speciality chemicals producer Croda (LSE: CRDA). Once a pandemic star thanks to high-margin lipids for vaccines, the share price has now reset. But for investors willing to look past headlines, the fundamentals are starting to catch up.
In its latest trading update last month, it reported sales of £425m, up 4.4%, with growth across all divisions, including Beauty, Fragrance & Flavours, and Crop Protection.
Operational and supply chain improvements have been a key focus. Across its 11 shared manufacturing sites, itâs been optimising production, warehousing and logistics, including targeted ingredient sales in beauty and crop markets.
Cost-saving efforts are progressing faster than planned. The company initially targeted £25m in savings for 2025 and £15m in 2026, but the programme has been expanded. By the end of 2027, it now expects to achieve £100m of annual savings, meaning this is the amount it plans to save each year once the programme is fully implemented. That is equivalent to roughly 8% of its 2024 cost base.
Future growth drivers
One of the companyâs biggest opportunities is ceramides â a breakthrough ingredient that helps skin and hair hydration, smoothness, and health.
Ceramides are now a must-have in premium beauty products, and the companyâs acquisition of Solus has given it the technology and expertise to supply these high-demand ingredients globally. Although sales are still tiny at present, back in H1 they leapt by 50%
Beyond ceramides, itâs also developing Luceane, a marine-derived ingredient that targets visible signs of ageing. This represents another example of how the company is staying at the forefront of high-margin, premium ingredients.
Risks
The chemical manufacturerâs turnaround isnât guaranteed. Execution risk remains, particularly around getting full value from acquisitions like Solus and delivering on cost-saving initiatives. If growth in ceramides or other key products falls short, margins and cash flow could be hit.
The business also faces currency risk: as a global supplier, swings in exchange rates can reduce reported profits. Geopolitical tensions, trade restrictions, or instability in key markets could also disrupt sales and supply chains.
Finally, the dividend yield of 4.4% could be at risk. In H1 2025, the company paid out 66% of earnings, resulting in a £61m net cash outflow. If profits donât accelerate, payouts may need to be adjusted to preserve cash.
Bottom Line
Croda is far from a household name, but its latest trading update highlights that the business is moving in the right direction.
Beyond immediate sales improvements, the long-term growth drivers remain compelling.
The rising role of biotechnology in pharmaceuticals and consumer care is particularly exciting â from plant cell structures and fermentation to marine biotech. Equally intriguing is the personalisation trend, with drugs tailored to patientsâ genetics and consumer care products formulated for individual needs.
The stockâs huge decline was clearly warranted after Covid, but the story now looks very different. Therefore, I think Crodaâs shares are worth investigating further.
The post The FTSE 100 nears 10,000, but this little-known stock is down 71% â could it be a hidden gem? appeared first on The Motley Fool UK.
Should you invest £1,000 in Croda International plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Croda International plc made the list?
.custom-cta-button p
margin-bottom: 0 !important;
color:#cc0000;
div.entry-footer div.textwidget div.braze-content-card div.wp-block-custom-block-collection-presentational-card
padding: 0 !important;
margin: 0 !important;
More reading
- Generation X! This dividend plan could add £185 a month to the State Pension
- Down 50%! Thank goodness I didnât invest £10k in this UK share 5 years ago â but should I buy today?
- 1 FTSE 100 stock I expect to outperform Rolls-Royce shares over the next 5 years
Andrew Mackie has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
[ad_2]
Source link