Do Recent Lithium Deals Signal Brighter Prospects for Albemarle Stock in 2025?

Trying to decide what to do with Albemarle stock right now? You’re not alone, and the story here is anything but boring. After a rocky three years where the price tumbled more than 60%, Albemarle shares have recently perked up, with a 9.2% climb in the past month, and the stock is now up 12.9% year-to-date. That is a big swing for a company at the center of the global electrification story, and it has left a lot of investors wondering if Albemarle is still misunderstood by the market, or if recent changes have reset growth expectations for good.

The past year has been almost flat, with just a 0.2% bump, so it is easy to see how shifting sentiment and renewed attention could spark a bigger move. What has changed? Besides a couple of eye-catching announcements surrounding lithium supply deals and strategic investments in battery tech, the real backdrop is a market reassessing both risk and opportunity in the clean energy transition. Institutions and retail investors alike are recalibrating how much upside might be left in names like Albemarle.

On valuation, Albemarle currently notches a score of 2 out of 6 on our undervaluation checklist. That means it is only passing on a couple of metrics that flag it as a potentially undervalued pick, hinting at a mix of caution and optimism in its price. So, is the market underappreciating Albemarle’s future, or is the recent bounce just a blip? Let’s dig into the different valuation approaches investors use to size up stocks like this, and stick around for what could be the most insightful way to judge Albemarle’s true worth at the end of the article.

Albemarle scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Albemarle Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s dollars. This approach highlights what those future profits are worth at present. For Albemarle, this involves considering both near-term analyst estimates and longer-term projections to capture the full potential and risk of its cash flow growth.

Currently, Albemarle’s last twelve months (LTM) free cash flow stands at negative $330 million. However, analysts forecast a turnaround, with free cash flows expected to reach $357 million by 2027. Beyond that, Simply Wall St extrapolates continued growth, projecting annual free cash flows to exceed $1.3 billion by 2035.

After discounting these future cash flows to reflect risk and the time value of money, the DCF model arrives at an estimated intrinsic value of $157.87 per share. This figure is approximately 39.0% higher than Albemarle’s recent stock price. This suggests the market is currently pricing in less growth or higher risk than the DCF model indicates.

This significant discount implies Albemarle could be undervalued if these cash flow projections are realized.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Albemarle.

Our Discounted Cash Flow (DCF) analysis suggests Albemarle is undervalued by 39.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Albemarle Price vs Sales

The Price-to-Sales (P/S) ratio is often favored for companies like Albemarle, particularly when earnings are volatile or negative due to sector cycles or investment phases. The P/S ratio values a company based on its revenue generation, making it a practical metric for evaluating potential in industries underpinned by long-term demand, such as lithium and chemicals.

The “right” or “fair” P/S multiple depends on several factors. Businesses with higher growth prospects or lower risk profiles tend to command higher ratios, while those facing uncertainty or slower growth are usually priced lower. These dynamics can shift quickly depending on industry trends and sentiment.

Albemarle’s current P/S ratio stands at 2.27x, noticeably above the Chemicals industry average of 1.24x and the peer group average of 1.79x. At first glance, this suggests Albemarle may be trading at a premium to its sector. However, to get a more nuanced perspective, it is helpful to consider the Simply Wall St Fair Ratio, a proprietary benchmark that accounts for specific company factors including growth outlook, profit margins, risk, and market cap.

The Fair Ratio, calculated at 1.27x, offers a more tailored and holistic view of what is reasonable for Albemarle right now. This metric goes beyond basic peer and industry comparisons by factoring in elements unique to Albemarle’s situation, making it a more meaningful assessment of its fair valuation.

Given that Albemarle’s current P/S ratio of 2.27x is significantly higher than the Fair Ratio of 1.27x, this approach suggests the stock may be priced above its fair value based on fundamentals and outlook.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Albemarle Narrative

Earlier, we mentioned that there is an even better way to understand a company’s value, so let’s introduce you to Narratives. A Narrative is simply your story or perspective about a company, connecting what you believe about its business to actual financial forecasts and a fair value target. Instead of just looking at numbers in isolation, Narratives let you frame your expectations, such as future revenue, profit margins, and earnings, and see how that story translates into a fair value today.

Narratives are easy and accessible, available on Simply Wall St’s Community page, where millions of investors weigh in. By building or following a Narrative, you can compare each story’s fair value with Albemarle’s current share price to help decide whether it is time to buy, hold, or sell. In addition, Narratives instantly update whenever new news or earnings numbers come in, so your view stays current.

For Albemarle, one Narrative may focus on aggressive cost-cutting and long-term contracts, expecting earnings of $1.1 billion and a price target near $200 if recovery is swift. Another may be much more cautious, projecting only modest revenue growth and seeing fair value as low as $58 if spot lithium prices remain depressed and risks play out. Narratives help you clarify what you believe, see how the numbers support (or challenge) that view, and make smarter decisions.

Do you think there's more to the story for Albemarle? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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