Albemarle CorporationALBNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Terminal value represents 98% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Sell

Fair Value: $96.39 per share(market-calibrated)

-45.9%

Upside to Fair Value

Current

$178.18

Pure Model

$85.88

Fair Value

$96.39

Bull Case

$132.77

Bear Case

$49.82

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

6.74%

Calibrated Growth

3.82%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $85.88.

What's Driving This Ratingfor ALB

↓

CapEx normalizing toward maintenance

Historical CapEx is 25.82% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$2.8B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 8.54% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.5B (11.54% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 12.24% revenue growth in Year 1, fading to 17.07% by Year 5 and 2.25% by Year 10. Revenue reaches $13.0B by Year 10 (vs $5.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $63.73/share (13.3x terminal FCF) while exit multiple gives $108.03/share (21.0x terminal FCF). The 14x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $178.18, the market implies 6.74% perpetual growth — 449bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 66.82% indicates efficient cash generation. FCF reaches $1.8B by Year 10 (13.51% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.45

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.02%

Cost of Debt

Pre-tax Cost of Debt4.09%

Tax Rate21.00%

After-tax Cost of Debt3.23%

Equity Weight (E/V)86.42%

Debt Weight (D/V)13.58%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (86.42% × 11.02%) + (13.58% × 3.23%)

= 9.96%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$5.8B	$6.2B	$8.8B	$11.1B	$13.0B
EBIT	$493M	$530M	$750M	$1.1B	$1.5B
Tax	$103M	$111M	$157M	$237M	$314M
NOPAT	$389M	$419M	$592M	$893M	$1.2B
+ Depreciation	$501M	$539M	$763M	$967M	$1.1B
- Capex	$1.5B	$1.3B	$1.4B	$1.3B	$519M
- Δ NWC	$82M	$19M	$166M	$145M	$37M
Free Cash Flow	-$682M	-$364M	-$228M	$459M	$1.8B
Discount Factor	0.909	0.752	0.622	0.514	0.387
Present Value	-$620M	-$274M	-$142M	$236M	$678M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.8B

Terminal Growth Rate2.25%

WACC9.96%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$23.2B

PV of Terminal Value$9.0B

Exit Multiple Method

Year 10 EBITDA$2.6B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$36.7B

PV of Terminal Value$14.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$195M

PV of Terminal Value$9.0B

Enterprise Value$9.2B

(-) Net Debt$1.7B

Equity Value$7.5B

Shares Outstanding118M

Price per Share$63.73

Exit Multiple Method

PV of Projected FCFs$195M

PV of Terminal Value$14.2B

Enterprise Value$14.4B

(-) Net Debt$1.7B

Equity Value$12.7B

Shares Outstanding118M

Price per Share$108.03

Pure Model Fair Value

$85.88

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
7.96%	$114.27	$118.75	$124.01	$130.28	$137.89
8.96%	$95.95	$99.04	$102.59	$106.71	$111.55
9.96%	$81.17	$83.38	$85.88	$88.72	$91.99
10.96%	$68.95	$70.58	$72.40	$74.44	$76.75
11.96%	$58.68	$59.91	$61.27	$62.77	$64.45

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$49.82

-72.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.81

Base Case

$85.88

-51.8% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.45

Bull Case

$132.77

-25.5% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.23

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth12.24%

Year 3 Revenue Growth2.47%

Year 5 Revenue Growth17.07%

Year 7 Revenue Growth11.14%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin8.54%

Terminal EBIT Margin13.00%

Tax Rate21.00%

Historical Capex / Rev25.82%

Terminal Capex / Rev4.00%

NWC / Revenue12.96%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 14x EV/EBITDA (Basic Materials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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