Is LyondellBasell Poised for a Recovery After Recent Share Price Rally in 2025?

Thinking about what to do with LyondellBasell Industries stock? You are not alone. Whether you have been following this chemical giant for years or just started eyeing it on the NYSE, there is a lot to consider right now. Shares have jolted up nearly 4% over the past week as broader market sentiment brightened, despite LYB sliding more than 15% in the past month. This recent pop is a reminder that, even with a choppy year behind it, investor interest can return quickly, especially if risk perceptions shift or new developments hit the wires.

While analysts still see upside from current levels, giving LYB about a 12% discount to their average target, it is hard to ignore the stock's longer-term sluggishness: down almost 38% over the past year and more than 26% across three years. Some investors see these numbers as signals to stay away, while others sense an opportunity lurking beneath the surface. That is where valuation analysis comes in handy, pointing out when a company is unfairly priced by the market.

For LyondellBasell, the latest valuation score comes in at 2 out of 6. In plain English, that means LYB appears undervalued based on two key metrics but falls short on the others. Curious what those checks are and what really drives value for this stock? Let us break down the main ways analysts assess whether LyondellBasell is worth more than its price tag suggests, before exploring an even deeper way to look at valuation that often gets overlooked.

LyondellBasell Industries delivered -38.1% returns over the last year. See how this stacks up to the rest of the Chemicals industry.

Approach 1: LyondellBasell Industries Cash Flows

A Discounted Cash Flow (DCF) model estimates a company's true value by projecting its future cash flows and discounting them back to their value in today’s dollars. This method aims to capture what the business might reasonably generate for shareholders if held over the long term.

LyondellBasell Industries currently generates Free Cash Flow (FCF) of about $637 million. Analysts expect this figure to grow steadily, reaching an estimated $3.76 billion by 2035 based on a two-stage Free Cash Flow to Equity model. Each year, cash flow growth rates vary, but the steady climb reflects cautious optimism about the company’s future earnings power.

According to this DCF analysis, the intrinsic or “fair” value for LyondellBasell shares is $144.79, significantly above the current share price. This implies the stock is about 61.7% undervalued at today’s market levels.

In simple terms, if these cash flow projections play out, the market is pricing LyondellBasell well below its true long-term worth.

Result: UNDERVALUED

Our DCF analysis suggests LyondellBasell Industries is undervalued by 61.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: LyondellBasell Industries Price vs Earnings

The Price-to-Earnings (PE) ratio is often the go-to valuation tool for profitable companies because it quickly shows how much investors are willing to pay for each dollar of the company’s earnings. A higher PE can sometimes reflect optimism about future profit growth, while a lower PE may signal slower expected growth or higher perceived risk.

In assessing what a "normal" or "fair" PE should be, both growth potential and risk levels matter. Higher expected earnings growth and lower risk tend to justify a higher PE. In contrast, lower earnings growth or higher risk typically warrants a lower ratio.

LyondellBasell Industries currently trades at a PE ratio of about 119x. Compared to the average for other chemicals companies (about 26x) and its peers (around 19x), LYB appears markedly more expensive on this metric. To provide a more comprehensive perspective, Simply Wall St calculates a proprietary Fair Ratio that blends factors such as LYB’s growth outlook, profit margins, scale, and risk profile. For LyondellBasell, the Fair Ratio is 40.06x.

When comparing these numbers, LYB’s current PE is well above its Fair Ratio, industry average, and peer benchmarks. This gap indicates the stock is trading at a premium that is not supported by fundamentals or outlook, at least according to this approach.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your LyondellBasell Industries Narrative

Beyond the numbers, investors can use Narratives, which are a simple and powerful way to connect a company's unique story with financial forecasts and a calculated fair value. A Narrative lets you explain why you think LyondellBasell Industries deserves a particular fair value, using your own assumptions for future revenue, earnings, and profit margins. This approach provides the reasoning behind the valuation.

Within Simply Wall St, Narratives are easy to use and collaborative tools. Millions of investors share and compare different forecasts, making deeper investing accessible to everyone. Narratives empower you to decide exactly when you think LYB is a buy or sell by showing how your fair value compares to the real market price. They automatically stay up to date as news, analyst estimates, or new earnings arrive.

For example, some investors are optimistic about LyondellBasell’s circular recycling initiatives and project a fair value as high as $90 per share. Others, cautious about weak earnings and market risks, set their fair value as low as $44. Narratives make these perspectives clear and help you see the logic and assumptions behind every valuation.

Do you think there's more to the story for LyondellBasell Industries? 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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