After crashing 51% this FTSE 250 stock is yielding a stellar 5.51% with a P/E of less than 10!

A specialty chemical company Johnson Matthew (LSE: JMAT) fell to FTSE 250 on 18 September last year and showed little sign of fighting back against the blue-chip index. Its shares are down 11.83% in the past year, and 51.54% in five years.

Founded in 1817, many expected Johnson Matthey to benefit from the shift in technology. Along with catalytic converters it invests in clean energy projects, including hydrogen fuel, which attracts the attention of ESG (environmental, social and corporate governance) investors.

Can the share price rise?

ESG trends have widened and the sector is giving up its gains as higher interest rates drive up borrowing costs. The drop in platinum prices affected Johnson Matthey’s profit in the title.

Yet investment is cyclical, and several factors that have worked against the team may now be working back in favor.

What is clear is that its shares are much cheaper than they were. Today, they trade at just 9.83 times earnings, warning bargain hunters like me.

Like many struggling companies, the board was looking to cut costs. Preliminary results for the year to 31 March showed that its turnaround plan had delivered around £75m of savings, beating its £55m target. The board has set itself the target of saving £200m this year, as it makes doing business easier.

Johnson Matthey is selling non-core businesses to focus on global energy transformation through core precious metals and catalysing technology operations. It will use some of the cash to reduce its total debt, which has reached £951m by 2025. That’s still very high, given today’s market cap of £2.36bn.

The stock offers an eye-catching trailing yield of 5.56%. The board has a good record of maintaining profits, as this chart shows, there is no shortage.

Chart with TradingView

Yet there is no getting away from the fact that high yields are partly down to an underperforming share price.

I think this assignment still has some way to go

Johnson Matthews’ share price took another hit on 27 November, when first-half results showed revenues fell 14% to £5.6bn, allegedly “challenge” macroeconomic background. Underlying operating profit fell by 4% to £154m.

CEO Liam Condon praised it “hard work” and kept the lead for the rest of the year, pinning his hopes on a strong second half. But will you find it?

I’m not convinced. Falling interest rates should make financing easier but we may not get it. Inflation could start in 2025, as the UK budget increases business costs as president-elect Donald Trump boosts the US economy. Trump’s plan to increase fossil fuels and cut ESG funding will not help.

The 11 analysts providing one-year share price forecasts for the stock have set an average target of 1,762p. If correct, that’s up an impressive 27.15% since today. Out of 12 ratings on the stock, four are Strong Buy and eight are Hold. No one says Sell, which I totally get. Few would want to highlight their losses at today’s price.

The shares should rise again at some point but I think the conditions are too challenging for me to buy them today. I watch it though.