E Is Albemarle A Bargain After Its 30% Plunge This Year?

Albemarle (ALB) has plunged 30% this year and has thus underperformed the market by a wide margin, as the S&P has remained essentially flat during this period. As such a pronounced divergence sometimes results in great investing opportunities, the big question is whether Albemarle has become a bargain.

Business overview

Albemarle is headquartered in the U.S. but serves approximately 2,500 customers in about 100 countries. It is a specialty chemicals company, with leading positions in lithium, bromine and refining catalysts. Lithium has become interesting from an investing point of view in recent years thanks to the exciting growth prospects in electronic devices and particularly the electric vehicles, which require 5,000 to 10,000 times as much lithium as mobile phones. Given these growth prospects, investors should review the potential of lithium stocks.

Albemarle operates in three segments: lithium, bromine specialties and catalysts. In the first nine months of the year, these segments have generated 38%, 29% and 33% of the total revenues and 48%, 27% and 25% of the total EBITDA, respectively.

In the most recent quarter, Albemarle grew its revenues by 3%, its EBITDA by 18% and its earnings per share by 13% over last year. The performance was driven by higher earnings in bromine specialties and catalysts, as well as higher lithium prices, which offset the reduced lithium volumes that resulted from unexpected shutdowns at three manufacturing sites. It was the 11th consecutive quarter of revenue growth over last year and the 8th consecutive quarter of double-digit EBITDA growth over last year. In addition, the three manufacturing sites of lithium have all returned to normal operation.

Growth

Albemarle has a volatile performance record. While it has been profitable every single year in the last decade, its earnings have fluctuated widely due to their strong dependence on the underlying business conditions, which are beyond the control of the company. Albemarle has customers in energy storage, the refining industry, consumer electronics, construction, and the automotive industry so it is greatly affected by the prevailing conditions in these sectors.

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Thorgood 1 week ago Member's comment

coreholding for me. I add on weakness. Dividend champion over the long haul.

William K. 1 week ago Member's comment

Quite educational. Some companies know exactly where to be, it seems.