Bank of America recently highlighted how higher and more volatile oil prices linked to conflict around Iran are affecting chemical stocks, putting Dow (DOW) in focus for investors watching input costs and share price swings.

Dow’s share price has been choppy around recent oil headlines, with a 1-month share price return of 5.36% and a 90-day share price decline of 10.88%. The 1-year total shareholder return of 32.76% contrasts with a 3-year total shareholder return decline of 31.47%, which highlights a period of improving short-term momentum following a tougher multi-year stretch.

If recent moves in Dow have you thinking about where capital-intensive industries could go next, it may be worth scanning 38 power grid technology and infrastructure stocks for more potential opportunities.

Bulls point to Dow’s recent 1 month rebound and its discount to some fair value estimates, while bears focus on the multi year total return decline and current loss making status. Which side does the valuation math support next?

Most Popular Narrative: 11.9% Undervalued

On the most followed narrative, Dow’s fair value of $35.69 sits above the last close at $31.44, which puts a spotlight on what is driving that gap.

Dow is targeting at least $1 billion in annual cost reductions by 2026, focusing on areas such as purchased services and contract labor. These cost-cutting measures aim to improve net margins and bolster earnings despite a challenging macroeconomic environment.

Want to see what sits behind that fair value for Dow? The narrative is based on modest revenue growth, margin repair, and a future earnings profile that is expected to differ from today.

Result: Fair Value of $35.69 (UNDERVALUED)

However, Dow’s margin pressures from higher feedstock and energy costs, along with uncertainty around European demand and regulations, could still challenge that undervalued narrative.

Next Steps

Given the mixed sentiment around Dow, with both risk concerns and potential rewards in play, it makes sense to check the data yourself and move quickly to form your own view using the 3 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Dow?

If news around Dow has sharpened your focus, this is a good moment to widen your watchlist and line up a few fresh ideas using the Simply Wall St Screener.

• Target potential value opportunities by scanning companies that currently screen as 49 high quality undervalued stocks across key fundamentals.
• Strengthen your income stream by reviewing stocks highlighted as 12 dividend fortresses with eye catching yields.
• Reduce portfolio stress by focusing on businesses that appear in the 74 resilient stocks with low risk scores and may offer more resilient profiles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.