With a recent daily loss of -5.75% and a 3-month decline of -42.58%, investors may wonder if Livent Corp (LTHM, Financial) is facing a temporary setback or if it presents a significant undervaluation opportunity. The company's Earnings Per Share (EPS) stands at $1.79, further piquing the interest of value investors. Is Livent significantly undervalued? This article delves into the valuation analysis, inviting readers to explore the financial intricacies of Livent Corp (LTHM).
Company Introduction
Livent Corp (LTHM, Financial), a pure-play lithium producer, emerged from FMC's spin-off of its lithium business in October 2018. The company is poised to merge with Allkem, another pure-play lithium producer, in a strategic all-stock transaction expected to close by the end of 2023. Livent's business benefits from the burgeoning demand for lithium, driven by the rise in electric vehicle adoption. The company's competitive edge lies in its low-cost lithium carbonate production from Argentinian brine resources. Additionally, Livent operates lithium hydroxide conversion plants in the United States and China and holds a 50% stake in a comprehensive Canadian lithium project.
The comparison between Livent's stock price and the GF Value—an estimation of its fair value—offers a compelling entry point into a deeper valuation analysis. This juxtaposition not only highlights the stock's potential but also aligns financial assessment with critical company details.
Summarize GF Value
The GF Value is a unique metric that determines the intrinsic value of a stock by considering historical trading multiples, an adjustment factor based on past performance and growth, and future business performance estimates. Livent Corp (LTHM, Financial) currently exhibits all the signs of being significantly undervalued according to the GF Value. With a market cap of $2.30 billion and a current share price of $12.96, Livent's valuation suggests that the long-term return on its stock is likely to surpass its business growth.
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Financial Strength
Investing in companies with robust financial strength mitigates the risk of permanent capital loss. Livent's financial strength, with a cash-to-debt ratio of 0.45, is fair, though it trails behind 61.04% of its peers in the Chemicals industry. The company's financial health, rated 7 out of 10 by GuruFocus, suggests a stable foundation for potential investors.
Profitability and Growth
Profitable companies often carry less risk, and Livent's consistent profitability over the past decade underscores its stable performance potential. With a remarkable operating margin of 51.46%, Livent outperforms 99.21% of companies in the Chemicals industry. The company's profitability and growth metrics, including a 3-year average EBITDA growth rate of 49.6%, place it in a favorable position relative to its industry counterparts.
ROIC vs. WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is crucial for evaluating a company's value creation. Livent's ROIC of 22.11 is notably higher than its WACC of 14.08, indicating its effectiveness in generating cash flow relative to the capital invested.
Conclusion
In conclusion, Livent Corp (LTHM, Financial) appears to be significantly undervalued. The company's financial condition and profitability are fair, and its growth ranks impressively in the Chemicals industry. To gain a more detailed understanding of Livent's financial journey, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
