Albemarle Corp (ALB)

Conclusion

Albemarle is a US specialty chemicals producer. Its Energy Storage segment supplies lithium compounds for batteries, and its Specialties and Ketjen segments sell bromine-based chemicals and refining technologies. At a price of 99.12 USD on 2026-11-09, its market capitalisation is 11.7 billion USD.

The verdict is undervalued. Today's price-to-earnings of 18.3 is a 4.6% premium to its ten-year median of 17.5, but enterprise value to EBITDA of 9.9 sits 32.6% below its median of 14.6. Price to sales of 1.9 and price to book of 1.1 are 50.6% and 62.0% below their medians. The fair value band runs from 99.51 to 149.26 USD, with a midpoint of 124.38 USD and a margin of safety of 25.5%. The discounted cash flow gives 74.91 USD per share, and the fair value from historical multiples is 173.86 USD. The reverse DCF implies growth of 9.3% a year, against a five-year revenue CAGR of 10.5%, although the three-year revenue CAGR is -11.1%.

What holds the case up is a net debt to EBITDA of 0.03, a current ratio of 2.34 and a free cash flow conversion of 108.2% on a trailing basis. What would break it is a return on invested capital of 5.3% against a WACC of 10.9%, a five-year free cash flow conversion of -40.5%, and a next-year EPS estimate growth of -7.3%, with analysts cutting estimates.

Financial health

Financial strength is green, held up by a net debt to EBITDA of 0.03 and a current ratio of 2.34, while interest coverage of 4.77 is only neutral. The quick ratio is 1.36 and debt to equity is 0.18. The Altman Z-score is 2.52, in the grey zone. The Altman model was designed for manufacturers, so for a chemicals producer it is indicative only. Insolvency risk: low, about 0.2% by the estimate of the Ohlson model over one to two years, based on figures to 2025-12-31. Debt has fallen against revenue growth over five years, as measured by a value of -12.7%.

Earnings quality

Earnings quality is yellow. Free cash flow conversion is 108.2% on a trailing basis, and the Beneish M-score of -3.64 reads as unlikely to be manipulated. Five-year free cash flow conversion is -40.5%, and accruals of -10.9% of assets support cash generation. The Piotroski score is 5 out of 9. Stock-based compensation is 0.65% of revenue, leaving free cash flow after it at 652.2 million USD. The share count has grown by 2.0% a year over five years, so there have been no net buybacks. The company beat estimates in 5 of the last 8 quarters, with an average surprise of 14.3%. Estimates are being cut: the current-year estimate fell 10.3% over 90 days, and the next-year estimate fell 16.2%.

Profitability

Profitability is yellow. Gross margin of 25.9%, operating margin of 14.4% and net margin of 10.4% are all below their ten-year medians of 33.4%, 17.9% and 13.4%. Operating margin has been stable, with a stability value of 0.88. The key problem is return on capital: ROIC is 5.3% against a WACC of 10.9%, a roicMinusWacc value of -5.6% that the input labels as value-destroying. The five-year median ROIC is 3.0%. Return on equity is 6.1%. The DuPont split for 2025 shows a net margin of -9.9%, an asset turnover of 0.31 and an equity multiplier of 1.72. Leverage is therefore not inflating returns; low asset turnover is the constraint. The tax rate of 21% is an assumption.

Growth

Growth is yellow. Revenue compounded at -11.1% over three years, 10.5% over five years and 6.2% over ten years. Revenue grew in 6 of the last 10 years. Free cash flow per share compounded at 2.4% over three years and 17.3% over ten years. An EPS growth rate is not available. The next-year EPS estimate points to growth of -7.3%, so recent momentum is weakening.

Valuation

Valuation is green. Price-to-earnings of 18.3 is 4.6% above its ten-year median, while enterprise value to EBITDA of 9.9 is 32.6% below its median, and price to sales and price to book are well below theirs. A historical median for price to free cash flow is not available, as there are only three data points. The discounted cash flow gives 74.91 USD per share at a discount rate of 11.7%, and 44.7% of its value comes from the terminal value. The fair value band of 99.51 to 149.26 USD is built on fixed assumptions, including a 5% equity risk premium and capped growth, so it is an order of magnitude, not a price target. The reverse DCF implies 9.3% growth a year, against 10.5% five-year revenue growth. The dividend yield is 3.05%, the forward yield is 1.82%, and the payout on free cash flow is 51.6%.

Risks

The weakest number is return on invested capital at 5.3% against a WACC of 10.9%. If it stays below the cost of capital, new investment will not create value, and the discount applied to the multiples may persist. Five-year free cash flow conversion of -40.5% shows that cash has lagged reported earnings across the cycle. Estimate cuts of -7.3% for next year would test the valuation if they are realised. Interest coverage of 4.77 would fall if earnings weakened further. Not available: EPS growth and the historical median for price to free cash flow. This analysis has limits: it has no debt maturity schedule and no revenue split by segment, so refinancing timing and the contribution of each business cannot be assessed.