LyondellBasell’s Valuations Compared to Its Peer

LyondellBasell’s one-year forward PE ratio

As of August 28, LyondellBasell’s one-year forward PE ratio stands at 10.0x. In comparison, Eastman Chemical (EMN) has a one-year forward PE ratio of 10.9x. The forward PE ratio is a measure that investors can use to compare two or more companies operating in the same industry to tell which company is overvalued and which is undervalued. The PE ratio considers the companies’ future estimated earnings when calculating the valuations.

LyondellBasell’s Valuations Compared to Its Peer

LyondellBasell’s valuations

In the next four quarters, LyondellBasell is expected to report an adjusted EPS of $11.04. The projected adjusted EPS is expected to be driven by higher volume and price growth fueling organic growth. Completing the A. Schulman (SHLM) acquisition is expected to drive the earnings. The synergies from the acquisition are expected to be at $150 million within a year. The acquisition of Quality Circular Polymers through the joint venture with Suez will likely contribute to LyondellBasell’s earnings.

However, the projected adjusted EPS represents a decline of 4.7% compared to the previous year. Eastman Chemical is expected to report an adjusted EPS of $8.86—7.3% growth compared to the previous year. Eastman Chemical’s growth is higher than LyondellBasell, which explains why Eastman Chemical is trading at a premium to LyondellBasell.

Investors could hold LyondellBasell indirectly by investing in the First Trust Materials AlphaDEX Fund (FXZ). FXZ has invested 3.75% of its portfolio in LyondellBasell. The fund also provides exposure to Olin (OLN) with a weight of 3.9% as of August 28.