Dow Inc (DOW)

Conclusion

Dow Inc is a US chemicals producer whose segments cover packaging and specialty plastics, industrial intermediates and infrastructure, and performance materials and coatings. At a price of 30.96 USD on 2026-11-09, the market capitalisation is 22.4 billion USD and the enterprise value is 37.2 billion USD.

The verdict is fair. EV/EBITDA is 10.6x against a ten-year median of 9.7x, a premium of 9.3%. Price to free cash flow is 22.3x against a median of 9.0x, while price to sales (0.53x against 0.83x) and price to book (1.39x against 2.11x) sit below their medians. The DCF gives 20.11 USD per share at a discount rate of 8.9%. The fair value band runs from 22.78 to 34.17 USD with a midpoint of 28.47 USD, a margin of safety of -8.0% at the current price. The fair value from historical multiples is 36.83 USD. The reverse DCF implies growth of 6.9% a year, while revenue grew at 0.7% a year over five years.

What supports the case is free cash flow conversion of 112.5% over five years, free cash flow after stock-based compensation of 1.0 billion USD over the last twelve months, and a Beneish M-score of -2.43, which reads as unlikely manipulation. What would break it is interest coverage of 0.88x, net debt to EBITDA of 4.2x and a ROIC of 1.9% against a WACC of 6.6%. The Altman Z-score of 1.60 sits in the distress zone.

Financial health

Financial strength is red: the current ratio of 1.76 is good, but leverage and weak interest cover pull the colour down. The quick ratio is 1.02 and debt to equity is 1.17. Net debt to EBITDA is 4.2x and interest coverage is 0.88x, so operating profit does not cover interest. The Altman Z-score is 1.60, in the distress zone. The Altman model was designed for manufacturers, and Dow is an industrial producer, so the reading applies with that caveat. Insolvency risk: low, about 1.8% by the estimate of the Ohlson model, based on annual figures to 2025-12-31. The low Ohlson estimate sits uneasily next to the weak interest cover, so the balance sheet deserves close attention.

Earnings quality

Earnings quality is yellow: three of four readings are good, but the Piotroski score of 3 out of 9 is weak. The Beneish M-score of -2.43 reads as unlikely manipulation. Free cash flow conversion over five years is 112.5%, while the trailing twelve-month figure is not available. The accruals ratio is -6.3%. The company's stock-based compensation is not available, so the dilution effect cannot be fully judged. The share count fell at a compound rate of 0.8% a year over five years, consistent with buybacks. Six of the last eight quarters beat estimates, with an average surprise of 21.2%. Current-year estimates rose 1.5% over 90 days, while next-year estimates fell 0.6%, with projected growth of -29.1%.

Profitability

Profitability is red, and all four readings are weak. The operating margin is 1.3% against a ten-year median of 8.8%, the gross margin is 11.1% against 13.7%, and the net margin is -1.9% against 2.9%. Margin stability is 0.49. ROIC is 1.9% against a WACC of 6.6%, a ROIC minus WACC of -4.7%, so the company is destroying value on this measure. The five-year median ROIC is 5.7%. Return on equity is -5.0%. The 2025 DuPont split shows a net margin of -6.6%, an asset turnover of 0.68 and an equity multiplier of 3.66. Leverage does not flatter the return here; it magnifies a negative margin.

Growth

Growth is red. Revenue compound growth is -11.1% over three years, 0.7% over five years and 0.8% over ten years. Revenue grew in 4 of 10 comparable years. EPS growth is not available because earnings are negative. Next-year EPS estimate growth is -29.1%, and that estimate was revised down 0.6% over 90 days. The reverse DCF implies growth of 6.9%, far above the 0.7% five-year revenue growth actually delivered.

Valuation

Valuation is yellow: the verdict is fair, with a margin of safety of -8.0%. Against ten-year medians, EV/EBITDA is 10.6x against 9.7x (premium 9.3%), price to free cash flow is 22.3x against 9.0x (premium 147.6%), price to sales is 0.53x against 0.83x (discount 36.3%) and price to book is 1.39x against 2.11x (discount 34.2%). The current P/E is not available because earnings are negative; the earnings yield is -3.6%. The DCF gives 20.11 USD per share at a discount rate of 8.9%, with 53.5% of the value in the terminal value. The fair value band runs from 22.78 to 34.17 USD with a midpoint of 28.47 USD, and the fair value from historical multiples is 36.83 USD. These are estimates built on fixed assumptions, including a 5% equity risk premium and capped growth, not price targets. The trailing dividend yield is 10.0% and the forward yield is 4.5%, but the payout on free cash flow is 223.7%, so the dividend is not covered by free cash flow.

Risks

Interest coverage of 0.88x means operating profit currently falls short of interest, so the company may need to refinance or cut costs to protect its payments. Net debt to EBITDA of 4.2x leaves little room for a further fall in earnings. The Altman Z-score of 1.60 signals financial stress that the Ohlson estimate does not fully capture. A ROIC of 1.9% below a WACC of 6.6% means that growth at current returns would destroy value. Falling next-year estimates, with projected EPS growth of -29.1%, weaken the earnings base for any recovery. The dividend payout of 223.7% of free cash flow is unsustainable without a change in cash generation. Several values are not available: the trailing twelve-month free cash flow conversion, stock-based compensation, EPS growth and the current P/E. This analysis also lacks a debt maturity schedule and revenue by segment, so it cannot judge refinancing timing or which business drives the weakness.