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How Albemarle’s Valuation Compares with Its Peers

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Albemarle’s forward PE ratio

In the previous part, we looked into analysts’ recommendations for Albemarle (ALB). In this part, we will compare ALB’s valuations with peer FMC (FMC) via the forward price-to-earnings (or PE) multiple.

On December 27, 2017, ALB’s one-year forward price-to-earnings multiple stood at 25.0x while FMC’s one-year forward price-to-earnings multiple stood at 27.4x.

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Albemarle’s valuations

At present, Albemarle’s (ALB) valuations are trailing FMC. Albemarle posted strong 3Q17 earnings backed by good growth in its Lithium segment. This segment has grown 37% in first nine months of 2017.

The continued global demand for lithium is expected to drive ALB’s growth. To meet this demand, ALB has announced the expansion of its plant capacities. ALB’s new technology to extract lithium is expected to increase its lithium production. As a result, analysts are expecting ALB’s fiscal 2018 adjusted earnings per share (or EPS) to be $5.15, representing growth of 15.3% from its expected earnings in fiscal 2017.

On the other hand, analysts have projected FMC’s fiscal 2018 adjusted earnings per share to grow 99.0% over its expected fiscal 2017 earnings. As a result, FMC is trading at a premium to its peer.

Investors can invest in Albemarle by investing in the PowerShares DWA Basic Materials Momentum Portfolio ETF (PYZ), which invests 3.2% in Albemarle. The other holdings of the fund include LyondellBasell (LYB) and Chemours (CC), with weights of 5.1% and 4.9%, respectively, on December 27, 2017.

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