Albemarle Corp Valuation – February 2016 $ALB

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 Companies Benjamin Graham Would Invest In Today – February 2016.  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 Albemarle Corp (ALB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Albemarle Corporation (Albemarle) is a developer, manufacturer and marketer of specialty chemicals across a range of end markets, including the petroleum refining, consumer electronics, plastics/packaging, construction, automotive, lubricants, pharmaceuticals, crop protection, food-safety and custom chemistry services markets. The Company operates through two segments: Performance Chemicals and Catalyst Solutions. As of December 31, 2014, the Performance Chemicals segment includes the Fire Safety Solutions, Specialty Chemicals and Fine Chemistry Services product categories. As of December 31, 2014, the Catalyst Solutions segment includes the Refinery Catalyst Solutions and Performance Catalyst Solutions product categories.


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 ALB

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 $6,316,704,576 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 48.31% Pass
6. Moderate PEmg Ratio PEmg < 20 18.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 Pass
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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.93 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 Fail

Stage 2: Determination of Intrinsic Value

ALB value chart February 2016

EPSmg $2.91
MG Growth Estimate -1.22%
MG Value $17.65
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $42.18
MG Value based on 0% Growth $24.72
Market Implied Growth Rate 5.12%
Current Price $54.48
% of Intrinsic Value 308.70%

Albemarle Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.17 in 2011 to an estimated $2.91 for 2015. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.12% 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 below the price.

Albemarle Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

ALB charts February 2016

Net Current Asset Value (NCAV) -$42.74
Graham Number $37.16
PEmg 18.73
Current Ratio 1.30
PB Ratio 1.95
Dividend Yield 2.10%
Number of Consecutive Years of Dividend Growth 20


Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $1,720,915,000
Total Current Liabilities $1,322,548,000
Long-Term Debt $3,558,964,000
Total Assets $9,675,064,000
Intangible Assets $4,708,079,000
Total Liabilities $6,530,575,000
Shares Outstanding (Diluted Average) 112,544,000

Earnings Per Share History

Next Fiscal Year Estimate $2.19
Dec2014 $1.69
Dec2013 $4.90
Dec2012 $3.47
Dec2011 $4.28
Dec2010 $3.43
Dec2009 $1.94
Dec2008 $2.09
Dec2007 $2.36
Dec2006 $1.47
Dec2005 $1.20
Dec2004 $0.65
Dec2003 $0.86
Dec2002 $0.85
Dec2001 $0.74
Dec2000 $1.09
Dec1999 $0.94
Dec1998 $0.82
Dec1997 $0.72
Dec1996 $1.33

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.91
Dec2014 $3.36
Dec2013 $4.00
Dec2012 $3.38
Dec2011 $3.17
Dec2010 $2.49
Dec2009 $1.95
Dec2008 $1.82
Dec2007 $1.56
Dec2006 $1.11
Dec2005 $0.90
Dec2004 $0.78
Dec2003 $0.87
Dec2002 $0.87
Dec2001 $0.88
Dec2000 $0.96
Dec1999 $0.85

Recommended Reading:

Other ModernGraham posts about the company

Albemarle Corporation Valuation – November 2015 Update $ALB
Albemarle Corporation Analysis – Initial Coverage $ALB

Other ModernGraham posts about related companies

Airgas Inc Stock Valuation – February 2016 $ARG
Air Products & Chemicals Inc Valuation – February 2016 $APD
FMC Corporation Valuation – January 2016 Update $FMC
Eastman Chemical Co Valuation – January 2016 $EMN
Ashland Inc Valuation – January 2016 Update $ASH
LyondellBasell Industries Valuation – November 2015 Update $LYB
Albemarle Corporation Valuation – November 2015 Update $ALB
Dow Chemical Company Analysis – October 2015 Update $DOW
Sigma-Aldrich Corporation Analysis – September 2015 Update $SIAL
FMC Corporation Analysis – September 2015 Update $FMC


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.  See my current holdings here.  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.  Please be sure to review our detailed disclaimer.

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.