Today, we examine the stock of LyondellBasell Industries NV (LYB, Financial), which experienced a daily loss of 1.65%. Over the last three months, the stock gained 7.69% and reported an Earnings Per Share (EPS) of 6.44. The key question to answer is whether the stock is fairly valued. In this article, we will conduct a valuation analysis to provide an answer. Continue reading for a comprehensive assessment.
Company Overview
LyondellBasell Industries NV operates in the petrochemical industry, with a significant presence in the United States, Europe, and Asia. As the world's largest producer of polypropylene, it also produces substantial quantities of polyethylene and propylene oxide. Its chemicals find use in a variety of consumer and industrial end products, with over half of its production coming from North American operations. The stock price stands at $96.24, with a GF Value of $97.12, indicating a fair valuation. The company has a market cap of $31.20 billion and reported sales of $43 billion.
Understanding the GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is based on historical trading multiples, a GuruFocus adjustment factor derived from past performance and growth, and estimates of future business performance. The GF Value Line provides an estimate of the fair value at which the stock should be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and if it's significantly below, it's undervalued. At its current price of $96.24 per share, LyondellBasell Industries NV appears to be fairly valued.
Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Key indicators include the cash-to-debt ratio and interest coverage. LyondellBasell Industries NV has a cash-to-debt ratio of 0.19, which ranks worse than 79.99% of 1414 companies in the Chemicals industry. The overall financial strength of LyondellBasell Industries NV is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies typically carries less risk. LyondellBasell Industries NV has been profitable for 10 of the past 10 years. Over the past 12 months, the company reported revenues of $43 billion and an EPS of $6.44, with an operating margin of 7.61% better than 54.5% of 1468 companies in the Chemicals industry. The average annual revenue growth of LyondellBasell Industries NV is 16.1%, which ranks better than 69.12% of 1415 companies in the Chemicals industry. The 3-year average EBITDA growth is 6.1%, which ranks worse than 58.33% of 1308 companies in the Chemicals industry.
ROIC vs WACC
Comparing the return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method to determine a company's profitability. For the past 12 months, LyondellBasell Industries NV's ROIC was 9.12, and its WACC was 6.3, indicating that the company is creating value for shareholders.
Conclusion
In conclusion, LyondellBasell Industries NV (LYB, Financial) stock appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 58.33% of 1308 companies in the Chemicals industry. To learn more about LyondellBasell Industries NV stock, check out its 30-Year Financials here.
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