With a daily loss of -5.59%, a 3-month decline of -37.67%, and an Earnings Per Share (EPS) of 1.79, investors might wonder if Livent Corp (LTHM, Financial) is significantly undervalued. This article delves into Livent's valuation to determine whether the current market price reflects the true value of the company. Read on for a detailed analysis of Livent's intrinsic value and market performance.
Company Introduction
Livent Corp (LTHM, Financial) is a pure-play lithium producer, integral to the burgeoning electric vehicle (EV) market due to its key role in manufacturing EV batteries. Since its spinoff from FMC in October 2018, Livent has focused on low-cost lithium carbonate production in Argentina, along with operating downstream lithium hydroxide conversion plants in the US and China. With a pending merger with Allkem, Livent is poised for growth in line with the increased demand for lithium. Despite this potential, Livent's current stock price of $13.52 starkly contrasts with the GF Value of $38.71, suggesting a significant undervaluation.
Summarize GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment factor for past performance, and future business performance estimates. According to this measure, Livent (LTHM, Financial) is significantly undervalued. The GF Value suggests that the stock's fair value is well above its current trading price, indicating potential for higher future returns.
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Financial Strength
Before investing, it's crucial to assess a company's financial strength. Livent's cash-to-debt ratio of 0.45 is lower than 61.03% of its peers in the Chemicals industry, indicating potential financial risks. However, with a financial strength rating of 7 out of 10, Livent's overall financial condition is fair. This assessment is vital for investors considering the long-term sustainability of Livent's growth and profitability.
Profitability and Growth
Consistent profitability is a less risky proposition for potential investors. Livent has shown a strong track record, with a remarkable operating margin of 51.46%, outperforming 99.28% of its industry peers. This profitability, coupled with a fair ranking of 7 out of 10, reflects Livent's solid financial footing. Moreover, Livent's growth is impressive, with a 3-year average annual revenue growth rate of 15%, placing it favorably within the industry. The company's EBITDA growth rate of 49.6% further underscores its potential for value creation.
ROIC vs WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is another indicator of profitability. Livent's ROIC of 22.11 is significantly higher than its WACC of 13.73, indicating efficient value generation for shareholders. This positive spread suggests that Livent is effectively converting invested capital into profitable returns.
Conclusion
In summary, Livent Corp (LTHM, Financial) appears to be significantly undervalued based on its GF Value. The company's financial health is stable, and its profitability is commendable. With growth rates surpassing many within the Chemicals industry, Livent presents an attractive opportunity for investors. For a deeper understanding of Livent's financials, interested parties can refer to 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.
