Investors can look to three places for thoughts on a particular stock; Wall Street analysts, the company itself, and one's own personal opinion. Shares of NOVA Chemicals (NCX) have dropped 12 straight points. The analysts hate it (Prudential just slapped a "sell" on the stock yesterday). The company is very upbeat and current earnings estimates look impressive. So why is the stock getting crushed?

I think the main reason is that chemical companies are very cyclical and are extremely reliant on commodity prices cooperating in order to make a nice profit. With input prices rising and uncertainty as to if that trend will continue or come back down to earth, investors are afraid of these stocks.

That said, at what point do we say that all of that has been more than priced into the shares? NCX stock trades at 9.3x 2005 estimates and 5.7x 2006 profit expectations. Yes, that's less than six times earnings! Even if you use the lowest estimate for 2006 on the Street, you get a P/E of 7.4x.

Investment theory says that low P/E's on cyclical companies are a signal of a peak in their profit cycle. However, the company is fairly early in their recovery and company executives don't see 2006 as the peak. Instead, they figure 2008 is a better guess. NOVA is a controversial name in a controversial industry, but I think the stock is worth much more than $40 per share.