Albemarle (ALB) has recently been on the list of Zacks.com’s Most Searched Stocks, therefore, it may be advisable to consider some key factors that could affect this stock’s performance in the near future.
Over the past month, shares of this specialty chemicals company have returned -14.4% compared to a +4.1% change for the Zacks S&P 500 Composite Index. The Zacks Chemical – Diversified industry, which Albemarle belongs to, has lost 6.3% in that period.The big question here is, what is the direction of this stock going forward?
Media announcements or rumors of significant changes in a company’s business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company’s future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
It essentially looks at how sell-side analysts covering the stock are revising their earnings forecasts to reflect the impact of the latest business trends. As a company’s earnings forecasts rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be interested in buying the stock, driving the share price up. This is why empirical studies have shown a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Albemarle is projected to post earnings of $0.74 per share, which would represent a decline of 89.9% from the same period a year ago. The Zacks Consensus Estimate has remained unchanged within the past 30 days.
The consensus earnings estimate for the current fiscal year is $2.07, indicating a change of -90.7% year over year. This estimate has changed -0.8% over the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $5.61, which represents a +170.9% change from what Albemarle was expected to report a year ago. Over the past month, estimates have changed -3.9%.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions to provide a more certainty view into near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, have earned Albemarle a Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s consensus EPS estimates over the next 12 months.
12 Month EPS
Projected Revenue Growth
Revenue growth is arguably the best indicator of a company’s financial health, but if a company can’t grow its revenue, then nothing happens. After all, it’s nearly impossible for a company to grow its revenue over the long term without growing its revenue. Therefore, it’s important to know a company’s revenue growth potential.
For Albemarle, the consensus revenue estimate for the current quarter is $1.41 billion, indicating a -40.5% change year-over-year, while estimates for the current and next fiscal years are $5.83 billion and $6.72 billion, indicating changes of -39.4% and +15.3%, respectively.
Last reported results and surprise history
Albemarle reported revenue of $1.36 billion for the most recent quarter, down 47.3% from the same period a year ago. EPS of $0.26 for the same period was lower than EPS of $10.32 in the same period a year ago.
Compared to the Zacks Consensus Estimate of $1.31 billion, reported revenues represented a surprise of +3.91%. EPS surprise was -25.71%.
Over the last four quarters, Albemarle has surpassed consensus estimates for EPS two times, and the company has also topped consensus estimates for revenue two times during that period.
evaluation
No investment decision can be made efficiently without taking into account stock valuation. Whether a stock’s current price properly reflects the intrinsic value of its business and the company’s growth prospects is a key factor in determining future stock price movements.
Comparing the current value of a company’s valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S) and Price to Cash Flow (P/CF) with the company’s historical values ​​helps in determining whether the stock is fairly valued, overvalued or undervalued, while comparing a company with its peers on the basis of these parameters gives a good sense of the fairness of the stock’s valuation.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional criteria to rate stocks from A to F (with An being better than B, B being better than C, etc.), which can be very helpful in identifying whether stocks are overvalued, fairly valued or temporarily undervalued.
On this score, Albemarle is rated a C, indicating that it is trading in line with its peers. Click here to see the values ​​of some of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding Albemarle is worth following, however, its Zacks Rank #3 suggests that Albemarle is likely to perform in line with the overall market in the near term.
Want the latest recommendations from Zacks Investment Research? Download today: 7 Best Stocks for the Next 30 Days Click to get this free report.
Albemarle Corporation (ALB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
