LyondellBasell Industries Analysis – August 2015 Update $LYB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how LyondellBasell Industries (LYB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LyondellBasell Industries N.V. (LyondellBasell) is a global, independent chemical company. The Company operates through five segments: Olefins and Polyolefins-Americas (OandP-Americas), Olefins and Polyolefins-Europe, Asia, International (OandP-EAI), Intermediates and Derivatives (IandD), Refining, and Technology. Its OandP-Americas segment produces and markets olefins, including ethylene and ethylene co-products, and polyolefin. Its OandP-EAI segment produces and markets olefins, including ethylene and ethylene co-products, polyolefin and specialty products, including polybutene-1 and polypropylene compounds. Its IandD segment produces and markets propylene oxide and its co-products and derivatives, acetyls, including methanol and ethylene oxide. Its Refining segment refines heavy, high-sulfur crude oil. Its Technology segment develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.


To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of LYB – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Pass
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg 7.50
MG Growth Estimate 15.00%
MG Value $288.60
Opinion Undervalued
MG Value based on 3% Growth $108.69
MG Value based on 0% Growth $63.72
Market Implied Growth Rate 1.28%
Current Price $82.90
% of Intrinsic Value 28.73%

LyondellBasell Industries qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short history post bankruptcy, and the high PB ratio.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) post bankruptcy to an estimated $7.50 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.28% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on LyondellBasell Industries (LYB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

LYB charts August 2015

Net Current Asset Value (NCAV) -$9.93
PEmg 11.06
Current Ratio 2.29
PB Ratio 4.94
Dividend Yield 3.47%
Number of Consecutive Years of Dividend Growth 5



Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $11,990,000,000
Total Current Liabilities $5,229,000,000
Long-Term Debt $7,728,000,000
Total Assets $24,605,000,000
Intangible Assets $1,214,000,000
Total Liabilities $16,678,000,000
Shares Outstanding (Diluted Average) 472,000,000

Earnings Per Share History

Next Fiscal Year Estimate $9.33
Dec14 $7.99
Dec13 $6.75
Dec12 $4.92
Dec11 $3.74
Dec10 $2.78
Dec09 -$7,105.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $7.50
Dec14 $6.13
Dec13 -$469.00
Dec12 -$944.17
Dec11 -$1,419.05
Dec10 -$1,893.79
Dec09 -$2,368.40

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 5/23/15
LyondellBassell Industries Quarterly Valuation – May 2015 $LYB
5 Highest Dividend Yields Among Undervalued Companies for the Enterprising Investor – March 2015
27 Companies in the Spotlight This Week – 2/14/15
LyondellBasell Industries Quarterly Valuation – February 2015 $LYB

Other ModernGraham posts about related companies

Albemarle Corporation Analysis – Initial Coverage $ALB
E I Du Pont de Nemours & Company Analysis – August 2015 Update $DD
Dow Chemical Analysis – July 2015 Update $DOW
Sigma-Aldrich Corporation Analysis – June 2015 Update $SIAL
Eastman Chemical Company Analysis – June 2015 Quarterly Update $EMN
FMC Corporation Analysis – June 2015 Quarterly Update $FMC
LyondellBassell Industries Quarterly Valuation – May 2015 $LYB
Olin Corporation Annual Valuation – 2015 $OLN
E. I. Du Pont De Nemours and Company Quarterly Valuation – May 2015 $DD
Dow Chemical Company Quarterly Valuation – April 2015 $DOW


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.