Livent Corp (LTHM, Financial) has experienced a notable decline, with a day's change showing a -4.83% loss and a 3-month loss of -27.85%. Meanwhile, its Earnings Per Share (EPS) (EPS) stands at 1.79. These figures prompt investors to question whether the stock is significantly undervalued. This article aims to explore Livent's valuation more deeply, providing insights into whether the current market price reflects the company's true worth. Keep reading for a detailed valuation analysis.
Company Introduction
Livent Corp (LTHM, Financial) is a pure-play lithium producer that emerged from a spinoff of FMC's lithium business in October 2018. With a planned merger with Allkem, another lithium producer, Livent is poised to capitalize on the burgeoning demand for lithium, driven by the rise of electric vehicles (EVs). The company's low-cost lithium carbonate production in Argentina, coupled with downstream conversion plants in the US and China, and a 50% stake in a Canadian lithium project, position it strategically within the industry. Despite the recent stock price drop to $14.77, Livent's Fair Value (GF Value) is estimated at $38.69, suggesting a potential undervaluation. This comparison between the current stock price and the GF Value sets the stage for an in-depth valuation analysis.
Summarize GF Value
The GF Value is a proprietary metric representing the intrinsic value of a stock. It incorporates historical trading multiples, an adjustment factor based on past performance, and future business estimates. Livent (LTHM, Financial) is currently considered significantly undervalued according to this measure. With a market cap of $2.70 billion, Livent's stock price of $14.77 is well below the GF Value Line, indicating the potential for higher future returns relative to its business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Livent's cash-to-debt ratio of 0.45 ranks lower than 60.89% of peers in the Chemicals industry. Despite this, its overall financial strength score is 6 out of 10, reflecting a fair financial position.
Profitability and Growth
Profitable companies, especially those with consistent performance, present lower investment risks. Livent has maintained profitability for 6 out of the past 10 years, with an impressive operating margin of 51.46%, outperforming 99.28% of its industry counterparts. This level of profitability has earned Livent a rank of 7 out of 10. Moreover, Livent's revenue growth rate of 15% and a 3-year average EBITDA growth of 49.6% underscore its strong growth prospects.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) offers insight into its value creation. Livent's ROIC of 22.11% is nearly double its WACC of 11.42%, indicating effective capital allocation and value generation for shareholders.
Conclusion
In conclusion, Livent (LTHM, Financial) appears to be significantly undervalued. The company exhibits fair financial health, solid profitability, and promising growth rates that surpass 90% of its industry peers. For a deeper dive into Livent's financials, consider exploring 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.
