Albemarle Corp (ALB, Financial) has experienced a notable daily loss of -6.28%, compounded by a 3-month decline of -36.19%. Yet, with an impressive Earnings Per Share (EPS) of 28.2, investors are prompted to consider whether the stock is significantly undervalued. This article delves into a valuation analysis to determine if the current market price truly reflects Albemarle's worth.
Company Introduction
Albemarle Corp (ALB, Financial) stands as the world's largest lithium producer, a pivotal player in the burgeoning electric vehicle battery market. With operations spanning from salt brine deposits in Chile and the U.S. to hard rock joint venture mines in Australia, Albemarle is also a leader in bromine production for flame retardants and a major producer of oil refining catalysts. The contrast between its current stock price of $120.78 and the GF Value of $476.46 suggests a potential undervaluation, inviting a closer examination of the company's intrinsic value.
Summarize GF Value
The GF Value is a unique measure of Albemarle's current intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor for past performance and growth, as well as future business performance forecasts. The GF Value Line suggests a fair trading value for the stock, with prices likely to oscillate around this benchmark. Currently, Albemarle's stock price is well below the GF Value Line, indicating that it may be significantly undervalued and could present higher future returns.
Given this significant undervaluation, Albemarle's stock may offer much higher long-term returns compared to its business growth, suggesting an attractive investment opportunity.
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Financial Strength
Assessing the financial strength of Albemarle is crucial before considering an investment. The company's cash-to-debt ratio of 0.44, though lower than many of its industry peers, still denotes a fair financial strength rating of 7 out of 10. This suggests that Albemarle maintains a reasonable balance between liquidity and liabilities.
Profitability and Growth
Albemarle's consistent profitability over the past decade signals reduced investment risk. With a high operating margin of 19.58%, which outperforms 89.57% of its industry counterparts, the company's profitability rank stands strong at 8 out of 10. Moreover, Albemarle's 3-year average revenue growth rate surpasses that of 79.66% of its industry peers, while its EBITDA growth rate of 45.7% ranks better than 88.25% of companies in the Chemicals industry, highlighting robust growth prospects.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) offers insight into Albemarle's value creation. With an ROIC of 13.29, slightly above its WACC of 13.18, Albemarle demonstrates its capability to generate cash flow effectively from its invested capital, suggesting a positive value proposition for shareholders.
Conclusion
In summary, Albemarle (ALB, Financial) presents as significantly undervalued when considering its fair financial condition, strong profitability, and commendable growth ranking. Investors seeking to understand the full picture of Albemarle's stock potential can explore its 30-Year Financials here.
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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.
