Albemarle Corp (ALB, Financial) has recently experienced a daily gain of 3.91%, yet over the past three months, it has seen a decline of 30.11%. With an impressive Earnings Per Share (EPS) of 28.2, investors are left to ponder: is Albemarle significantly undervalued? This article seeks to unravel the intricacies of Albemarle's current valuation, encouraging readers to delve into the analysis that follows.
Company Introduction
Albemarle Corp (ALB, Financial), the world's leading lithium producer, is at the forefront of the electric vehicle battery demand surge. With operations spanning from salt brine deposits in Chile and the U.S. to joint venture mines in Australia, Albemarle also excels in bromine production for flame retardants and is a significant player in oil refining catalysts. The company's stock price currently stands at $127.39, which, when juxtaposed with the GF Value of $478.06, suggests a potential undervaluation worth exploring. Below is the income breakdown of Albemarle, providing a glimpse into its financial performance.
Summarize GF Value
The GF Value is a unique measure indicating the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance estimates. Albemarle's GF Value suggests that the company is significantly undervalued. With a fair value estimate steeped in rigorous analysis, the stock's current price of $127.39 per share may represent a compelling opportunity for investors seeking long-term returns that could potentially outpace the company's business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investors must scrutinize a company's financial strength to mitigate the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio, which for Albemarle stands at 0.44, reveal the company's financial capacity to address its liabilities. Although this ratio positions Albemarle below 61.54% of its peers in the Chemicals industry, its overall financial strength score is a solid 7 out of 10. The following chart illustrates Albemarle's debt and cash evolution over recent years.
Profitability and Growth
Albemarle's profitability is a testament to its less risky investment profile, particularly highlighted by a decade of consistent profitability. With annual revenues of $9.90 billion and an operating margin surpassing 89.68% of its industry counterparts, Albemarle's financial health appears robust. Furthermore, the company's growth trajectory is impressive, with a 3-year average annual revenue growth rate of 22.6%, outperforming 79.71% of the Chemicals industry, and an EBITDA growth rate of 45.7%, ranking above 88.24% of the industry players.
ROIC vs. WACC
An insightful metric for evaluating profitability is the comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). Albemarle's ROIC of 13.29 is slightly higher than its WACC of 13.11, indicating the company's effective capital utilization. The historical ROIC vs WACC comparison is depicted in the chart below.
Conclusion
Considering Albemarle's fair financial condition, strong profitability, and superior growth ranking, the stock appears to be significantly undervalued. Investors seeking detailed insights into Albemarle's financials can explore its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, please visit the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
