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 the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Albemarle Corp., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 16.16%
01 FCFF0 745,588
1 FCFF1 785,423 = 745,588 × (1 + 5.34%) 676,148
2 FCFF2 841,551 = 785,423 × (1 + 7.15%) 623,673
3 FCFF3 916,868 = 841,551 × (1 + 8.95%) 584,953
4 FCFF4 1,015,461 = 916,868 × (1 + 10.75%) 557,720
5 FCFF5 1,142,971 = 1,015,461 × (1 + 12.56%) 540,413
5 Terminal value (TV5) 35,690,340 = 1,142,971 × (1 + 12.56%) ÷ (16.16% – 12.56%) 16,874,909
Intrinsic value of Albemarle Corp. capital 19,857,816
Less: Long-term debt (fair value) 2,993,027
Intrinsic value of Albemarle Corp. common stock 16,864,789
 
Intrinsic value of Albemarle Corp. common stock (per share) $143.73
Current share price $172.91

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

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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.

Weighted Average Cost of Capital (WACC)

Albemarle Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 20,288,644 0.87 18.07%
Long-term debt (fair value) 2,993,027 0.13 3.26% = 3.94% × (1 – 17.32%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 117,336,441 × $172.91
= $20,288,644,013.31

   Long-term debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (16.10% + 22.00% + 14.60% + 15.70% + 18.20%) ÷ 5
= 17.32%

WACC = 16.16%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Albemarle Corp., PRAT model

Microsoft Excel
Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Interest and financing expenses 122,973 61,476 73,116 57,695 52,405
Net income attributable to Albemarle Corporation 2,689,816 123,672 375,764 533,228 693,562
 
Effective income tax rate (EITR)1 16.10% 22.00% 14.60% 15.70% 18.20%
 
Interest and financing expenses, after tax2 103,174 47,951 62,441 48,637 42,867
Add: Cash dividends declared 185,078 182,385 163,990 155,800 144,601
Interest expense (after tax) and dividends 288,252 230,336 226,431 204,437 187,468
 
EBIT(1 – EITR)3 2,792,990 171,623 438,205 581,865 736,429
 
Current portion of long-term debt 2,128 389,920 804,677 187,336 307,294
Long-term debt, excluding current portion 3,214,972 2,004,319 2,767,381 2,862,921 1,397,916
Total Albemarle Corporation shareholders’ equity 7,982,627 5,625,266 4,268,227 3,932,250 3,585,321
Total capital 11,199,727 8,019,505 7,840,285 6,982,507 5,290,531
Financial Ratios
Retention rate (RR)4 0.90 -0.34 0.48 0.65 0.75
Return on invested capital (ROIC)5 24.94% 2.14% 5.59% 8.33% 13.92%
Averages
RR 0.49
ROIC 10.98%
 
FCFF growth rate (g)6 5.34%

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).

1 See details »

2022 Calculations

2 Interest and financing expenses, after tax = Interest and financing expenses × (1 – EITR)
= 122,973 × (1 – 16.10%)
= 103,174

3 EBIT(1 – EITR) = Net income attributable to Albemarle Corporation + Interest and financing expenses, after tax
= 2,689,816 + 103,174
= 2,792,990

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,792,990 – 288,252] ÷ 2,792,990
= 0.90

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,792,990 ÷ 11,199,727
= 24.94%

6 g = RR × ROIC
= 0.49 × 10.98%
= 5.34%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (23,281,671 × 16.16% – 745,588) ÷ (23,281,671 + 745,588)
= 12.56%

where:

Total capital, fair value0 = current fair value of Albemarle Corp. debt and equity (US$ in thousands)
FCFF0 = the last year Albemarle Corp. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Albemarle Corp. capital

FCFF growth rate (g) forecast

Albemarle Corp., H-model

Microsoft Excel
Year Value gt
1 g1 5.34%
2 g2 7.15%
3 g3 8.95%
4 g4 10.75%
5 and thereafter g5 12.56%

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)
= 5.34% + (12.56% – 5.34%) × (2 – 1) ÷ (5 – 1)
= 7.15%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 5.34% + (12.56% – 5.34%) × (3 – 1) ÷ (5 – 1)
= 8.95%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 5.34% + (12.56% – 5.34%) × (4 – 1) ÷ (5 – 1)
= 10.75%