Stock Analysis on Net
Stock Analysis on Net

Albemarle Corp. (NYSE:ALB)

This company has been moved to the archive! The financial data has not been updated since May 3, 2023.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Albemarle Corp., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 17.94%
01 FCFE0 1,503,990
1 FCFE1 1,667,502 = 1,503,990 × (1 + 10.87%) 1,413,821
2 FCFE2 1,844,336 = 1,667,502 × (1 + 10.60%) 1,325,855
3 FCFE3 2,034,996 = 1,844,336 × (1 + 10.34%) 1,240,359
4 FCFE4 2,239,929 = 2,034,996 × (1 + 10.07%) 1,157,567
5 FCFE5 2,459,516 = 2,239,929 × (1 + 9.80%) 1,077,679
5 Terminal value (TV5) 33,178,575 = 2,459,516 × (1 + 9.80%) ÷ (17.94% – 9.80%) 14,537,760
Intrinsic value of Albemarle Corp. common stock 20,753,041
 
Intrinsic value of Albemarle Corp. common stock (per share) $176.87
Current share price $172.91

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.83%
Expected rate of return on market portfolio2 E(RM) 13.48%
Systematic risk of Albemarle Corp. common stock βALB 1.52
 
Required rate of return on Albemarle Corp. common stock3 rALB 17.94%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rALB = RF + βALB [E(RM) – RF]
= 4.83% + 1.52 [13.48% – 4.83%]
= 17.94%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Albemarle Corp., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Cash dividends declared 185,078 182,385 163,990 155,800 144,601
Net income attributable to Albemarle Corporation 2,689,816 123,672 375,764 533,228 693,562
Net sales 7,320,104 3,327,957 3,128,909 3,589,427 3,374,950
Total assets 15,456,522 10,974,118 10,450,946 9,860,863 7,581,674
Total Albemarle Corporation shareholders’ equity 7,982,627 5,625,266 4,268,227 3,932,250 3,585,321
Financial Ratios
Retention rate1 0.93 -0.47 0.56 0.71 0.79
Profit margin2 36.75% 3.72% 12.01% 14.86% 20.55%
Asset turnover3 0.47 0.30 0.30 0.36 0.45
Financial leverage4 1.94 1.95 2.45 2.51 2.11
Averages
Retention rate 0.75
Profit margin 17.58%
Asset turnover 0.38
Financial leverage 2.19
 
FCFE growth rate (g)5 10.87%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Retention rate = (Net income attributable to Albemarle Corporation – Cash dividends declared) ÷ Net income attributable to Albemarle Corporation
= (2,689,816 – 185,078) ÷ 2,689,816
= 0.93

2 Profit margin = 100 × Net income attributable to Albemarle Corporation ÷ Net sales
= 100 × 2,689,816 ÷ 7,320,104
= 36.75%

3 Asset turnover = Net sales ÷ Total assets
= 7,320,104 ÷ 15,456,522
= 0.47

4 Financial leverage = Total assets ÷ Total Albemarle Corporation shareholders’ equity
= 15,456,522 ÷ 7,982,627
= 1.94

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.75 × 17.58% × 0.38 × 2.19
= 10.87%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (20,288,644 × 17.94% – 1,503,990) ÷ (20,288,644 + 1,503,990)
= 9.80%

where:
Equity market value0 = current market value of Albemarle Corp. common stock (US$ in thousands)
FCFE0 = the last year Albemarle Corp. free cash flow to equity (US$ in thousands)
r = required rate of return on Albemarle Corp. common stock

FCFE growth rate (g) forecast

Albemarle Corp., H-model

Microsoft Excel
Year Value gt
1 g1 10.87%
2 g2 10.60%
3 g3 10.34%
4 g4 10.07%
5 and thereafter g5 9.80%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 10.87% + (9.80% – 10.87%) × (2 – 1) ÷ (5 – 1)
= 10.60%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 10.87% + (9.80% – 10.87%) × (3 – 1) ÷ (5 – 1)
= 10.34%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 10.87% + (9.80% – 10.87%) × (4 – 1) ÷ (5 – 1)
= 10.07%