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    Albemarle Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -9.14

    Market price

    USD 110.91

    Implied upside

    -108.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 20.6% of revenue against depreciation of 8.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 20.3x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD -9.14-108.2%
    Exit multiple
    USD 28.02-74.7%
    Market price
    USD 110.91

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -93837952-469189760FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.6bnUSD 4.1bnUSD 3.6bnUSD 3.2bnUSD 2.9bn-11.1%
    EBITUSD 288.0mUSD 256.1mUSD 227.6mUSD 202.4mUSD 179.9m-11.1%
    NOPATUSD 227.5mUSD 202.3mUSD 179.8mUSD 159.9mUSD 142.1m-11.1%
    Add depreciation & amortisationUSD 369.6mUSD 328.5mUSD 292.1mUSD 259.6mUSD 230.8m-11.1%
    Less capital expenditureUSD -941.3mUSD -836.8mUSD -743.9mUSD -661.3mUSD -587.9m-11.1%
    Less increase in working capitalUSD 250.4mUSD 222.6mUSD 197.9mUSD 175.9mUSD 156.4m+11.1%
    Free cashflow to firmUSD -93.8mUSD -83.4mUSD -74.2mUSD -65.9mUSD -58.6m+11.1%
    Discount factor0.95210.86300.78220.70900.6427-
    Present valueUSD -89.3mUSD -72.0mUSD -58.0mUSD -46.7mUSD -37.7m+19.4%
    Present Value Of The ForecastUSD -303.7m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.224Reported 1.334, pulled toward 1.0 (Blume)
    Cost of equity11.73%Risk-free + beta x equity risk premium
    Cost of debt6.01%Interest expense / average total debt
    Market capitalisationUSD 13.1bn79.9% of capital
    Total debtUSD 3.3bn20.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.32%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD -9.14

    150% of EV

    Forecast FCFF, final year
    USD -58.6m
    Capex at depreciation, working capital in reinvestment
    USD 142.1m
    Less reinvestment at g/ROIC (24.2% of NOPAT)
    USD -34.4m
    Capitalised
    USD 107.7m
    ROIC (WACC floor)
    10.3%
    Terminal value, undiscounted
    USD 1.4bn
    Terminal value, discounted
    USD 906.8m
    Enterprise value
    USD 603.1m
    Less net debt
    USD 1.7bn
    Equity value
    USD -1.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 28.02

    106% of EV

    Terminal value, undiscounted
    USD 8.2bn
    Terminal value, discounted
    USD 5.3bn
    Enterprise value
    USD 5.0bn
    Less net debt
    USD 1.7bn
    Equity value
    USD 3.3bn

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.32%-6.67-6.62-6.57-6.52-6.47
    9.32%-8.09-8.05-8.01-7.96-7.92
    10.32%-9.22-9.18-9.14-9.10-9.07
    11.32%-10.12-10.09-10.05-10.02-9.99
    12.32%-10.86-10.83-10.80-10.77-10.74

    Outlined: this model. Green text: above today's price of 110.91. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    EBIT margin6.3%60.5%+54.2pp
    Discount rate10.3%2.6%-7.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.