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Albemarle Corporation (NYSE:ALB): Is It A Good Long Term Opportunity?

Simply Wall St

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The latest earnings announcement Albemarle Corporation (NYSE:ALB) released in December 2018 confirmed that the business gained from a significant tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts view Albemarle's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

View our latest analysis for Albemarle

Market analysts' consensus outlook for the coming year seems pessimistic, with earnings declining by -1.5%. But in the following year, there is a complete contrast in performance, with generating double digit 3.9% compared to today’s level and continues to increase to US$850m in 2022.

NYSE:ALB Past and Future Earnings, May 2nd 2019

While it is informative knowing the growth rate each year relative to today’s level, it may be more beneficial to gauge the rate at which the company is moving on average every year. The benefit of this technique is that we can get a better picture of the direction of Albemarle's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 6.3%. This means, we can presume Albemarle will grow its earnings by 6.3% every year for the next few years.

Next Steps:

For Albemarle, I've compiled three relevant aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is ALB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ALB is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALB? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.