It hasn't been a great evening session for Albemarle investors, who have watched their shares sink by -2.0% to a price of $207.99. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Albemarle has a trailing 12 month P/E ratio of 6.7 and a P/B ratio of 2.65.
Albemarle's PEG ratio is 7.79, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2020-04-15 | 2021-02-19 | 2022-02-22 | 2023-02-15 | |
|---|---|---|---|---|
| Revenue (MM) | $3,589 | $3,129 | $3,328 | $7,320 |
| Gross Margins | 35.0% | 31.8% | 30.0% | 42.0% |
| Operating Margins | 18.6% | 16.2% | 15.1% | 33.9% |
| Net Margins | 14.86% | 12.01% | 3.72% | 36.75% |
| Net Income (MM) | $533 | $376 | $124 | $2,690 |
| Net Interest Expense (MM) | -$58 | -$73 | -$61 | -$123 |
| Depreciation & Amort. (MM) | -$213 | -$232 | -$254 | -$301 |
| Earnings Per Share | $5.02 | $3.52 | $1.06 | $31.2 |
| EPS Growth | n/a | -29.88% | -69.89% | 2843.4% |
| Diluted Shares (MM) | 106 | 107 | 117 | 117 |
| Free Cash Flow (MM) | $1,561 | $1,649 | $1,298 | $3,169 |
| Capital Expenditures (MM) | -$841 | -$850 | -$954 | -$1,262 |
| Net Current Assets (MM) | -$3,542 | -$3,776 | -$3,175 | -$2,079 |
| Current Ratio | 1.58 | 1.22 | 1.06 | 1.89 |
| Long Term Debt (MM) | $2,863 | $2,767 | $2,004 | $3,215 |
| Net Debt / EBITDA | 3.4 | 4.51 | 4.77 | 0.63 |
Albemarle benefits from growing revenues and increasing reinvestment in the business, exceptional EPS growth, and wider gross margins than its peer group. The company's financial statements show decent operating margins with a positive growth rate and consistent free cash flow. However, the firm has a highly leveraged balance sheet. Finally, we note that Albemarle has a decent current ratio.
