Stock Report: Rohm and Haas Company (ROH) - Rachel Siedentopf
I. Recommendation: Buy @ $54.50
- 2008 EPS: 3.872
- 2009 EPS: 4.322
- P/E2008: 53.09/3.87 = 13.72
- Current Price: $53.091
- TTMEPS: 3.132
2
- TTMP/E: 17.48
- Trailing P/E: 53.09/3.13 = 16.96
- P/E2009: 53.09/4.32 = 12.29
- g‘07-’09 = 3.13(1+g)2 = 4.32  g = .1748%
- PEG‘09 = 16.96/0.17.48 = 0.97.03
- Normalized P/E = 17.63
- Ke = Rf + ß(Rm-Rf)
2
- DIV1 & DIV2 = 1.48 per year
- P2 = 4.32 * 17.6 = 76.03
Ke = 3.61% + 0.6863(4%)  6.355%5,6
- IV = 1.48/(1.06355)11/12 + (1.48+76.03)/(1.06355)23/12 = 1.40 + 68.88 = $70.28
 ROH is undervalued

Exit Point: December 2009 @ approx. $76.00
 HPR = (76 - 54.5 + 1.48 + 1.48)/54.5 = 44.88%
II. Investment Positives
• Leading Technology: Glycerol Purification
Rohm and Haas is partnering with another industry leader, Ion Exchange Resins and Novasep, to market and sell a new
technology which allows for the purification of crude glycerol by-product from biodiesel processing. This new technology
is superior to conventional distillation because it minimizes waste and increases productivity, thereby decreasing costs.
With such an eco-conscious, low cost oriented consumer market, this new development can only lead to positives for ROH
and its stock price.1
• Increased Earnings Driven by Increased Sales
In 2007, fourth quarter earnings rose 16% compared to the same period in 2006, beating analysts’ estimates of 78 cents per
share earnings (91 cents, actual per share earnings). Overall, earnings in 2007 were 8% higher than in 2006. Raj L. Gupta,
chief executive officer of Rohm and Haas, contributes the growth in sales to robust organic growth, especially in the
Electronic Materials business. Also, the company is expanding its chemical businesses to rapidly developing economies,
which also contributed to the increase in earnings.1
• “The Comprehensive Journey”
Rohm and Hass has partnered with Natural Step International, a consulting firm, to launch a green initiative: “The
Comprehensive Journey”. With the help of Natural Step, ROH will incorporate sustainable objectives in all of its
business, research and development, and operating practices throughout the company. Rohm and Hass’ level of
corporate social responsibility is an investment positive.2
III. Investment risks
• Market Conditions: Higher Costs for Raw Materials
In today’s market, the costs of raw materials are high, cutting into the potential gains we seek as investors. However, this is
a general problem that applies to most (if not all) industries in the market.
• Lawsuits
As a leader in the chemical industry, Rohm and Haas must nurture its research and development business; working with
foreign chemicals can result in harmful affects on the individual researchers employed by ROH. In recent months, the
company has been served with three lawsuits by families of former employees who have developed brain tumors. Rohm and
Haas has yet to be proven responsible, but in either case, it is bad publicity and may result in substantial losses
(settlements).4
1
2
3
4
5
6
source: bigcharts.com 02/06/08
source: finance.yahoo.com 02/06/08
source: morningstar.com 02/06/08 (Normalized P/E: averaged last five years  more representative of future expectations)
source: google.com 02/06/08
source: Federal Reserve Bank: St. Louis 02/06/08
source: Beta was calculated using regression analysis, where the dependent variable is ROH stock returns (monthly data for five
years – 60 returns) and the independent variable is S&P 500 stock returns (monthly data for five years – 60 returns).