(FORTUNE Magazine) – Bedeviled by overcapacity and sluggish demand, chemical shares are in the dumps. Yet Akzo, a Netherlands-based company with $9.9 billion in annual sales, is popping up on the buy lists of savvy bargain hunters. Reason: While most chemical producers worldwide are selling for about 12 times earnings and six times cash flow, Akzo shares go for just half that. Says Thomas McIntyre of Dessauer Asset Management in Orleans, Massachusetts: ''It's one of the cheapest chemical stocks in the world.'' Most of Akzo's discount results from a lingering image problem. While share prices in the U.S. and Europe bounced back after the 1987 stock market crash, the Dutch market, where Akzo is listed, was held down by high interest rates. But analysts argue that Akzo should be exempted from the Dutch market's malaise. ''With 91% of its revenues from outside the Netherlands, it's an international company,'' insists Shaw Bridges at Merrill Lynch. Bridges thinks that the recent creation of Akzo-sponsored American depositary receipts should broaden investor interest and bring the stock more in line with international chemical companies. Akzo has also suffered from the lingering perception that it is a dicey bet. Many investors still remember the 1970s, when the price of synthetic fibers -- then nearly 50% of Akzo's business -- plunged, dragging earnings and the stock price down. But the company's new fans argue that such fears are no longer justified. In recent years Akzo has shifted into more stable, higher- margin operations and has broadened its geographic diversification. Already earnings are proving sturdier. Says Alan Greene, managing partner of David J. Greene & Co., a New York money management firm and a big buyer of Akzo stock: ''There's virtually no chance of an earnings collapse.''

In fact, quite the opposite: Akzo has had enormous success with its birth- control pill, a leader in Europe, and is seeking approval in both the U.S. and Japan. It recently introduced a new pill that is promising because of its low hormone content. Increasingly it seems as if Akzo's discount may be short- lived.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: IS AKZO READY TO RISE?