LyondellBasell Industries NV (NYSE:LYB) experienced a daily loss of -2.61%, with a 3-month gain of 7.55%. The company's Earnings Per Share (EPS) stand at 6.44. The question that arises is whether the stock is fairly valued. The valuation analysis provided below aims to answer this question, offering a comprehensive understanding of the company's worth.
An Overview of LyondellBasell Industries NV
LyondellBasell Industries NV is a major petrochemical producer with operations spread across the United States, Europe, and Asia. As the world's largest producer of polypropylene, it also produces a significant amount of polyethylene and propylene oxide. These chemicals find extensive use in various consumer and industrial end products. Over half of LyondellBasell's production originates from its North American operations. The company's stock price stands at $97.91, with a market cap of $30.80 billion, and the GF Value estimates its fair value at $96.58.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
LyondellBasell Industries NV's stock is estimated to be fairly valued, according to the GuruFocus Value calculation. As it is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of LyondellBasell Industries NV
Investing in companies with poor financial strength can lead to a higher risk of permanent loss of capital. Therefore, it is crucial to review a company's financial strength before deciding to buy its stock. LyondellBasell Industries NV has a cash-to-debt ratio of 0.19, which is worse than 80.2% of 1500 companies in the Chemicals industry. GuruFocus ranks the overall financial strength of LyondellBasell Industries NV at 6 out of 10, indicating a fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. LyondellBasell Industries NV has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $43 billion and Earnings Per Share (EPS) of $6.44. Its operating margin is 7.61%, which ranks better than 55.84% of 1506 companies in the Chemicals industry. Overall, the profitability of LyondellBasell Industries NV is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. LyondellBasell Industries NV's 3-year average revenue growth rate is better than 69.09% of 1446 companies in the Chemicals industry. However, its 3-year average EBITDA growth rate of 6.1% ranks worse than 58.26% of 1337 companies in the Chemicals industry.
Return on Invested Capital Vs. Weighted Cost of Capital
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) offers another perspective on its profitability. For the past 12 months, LyondellBasell Industries NV's ROIC is 9.12, and its WACC is 6.4.
Overall, LyondellBasell Industries NV (NYSE:LYB) stock is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 58.26% of 1337 companies in the Chemicals industry. To learn more about LyondellBasell Industries NV stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.