ALB: FMC vs. Albemarle: Which Lithium Stock is a Better Buy?

FMC Corporation (FMC) and Albemarle Corporation (ALB) are two leading chemical manufacturing companies. FMC sells crop protection chemicals that include insecticides, herbicides, and fungicides that are used in agriculture to enhance crop yield. ALB markets engineered specialty chemicals and operates in the three segments — Lithium, Bromine Specialties, and Catalysts.

Global lithium demand is expected to increase to 117,400 mt in 2024 from an estimated 47,300 mt in 2020 at a 25.5% CAGR driven by growth in electric vehicle battery sales. Lithium-related stocks like FMC and ALB are well positioned to soar in the upcoming months with growing numbers of cars rolling out of factories in Europe and China.

Both stocks have generated decent returns over the past year. While FMC returned 13.4% over this period, ALB gained 106.9%. In terms of past six-month performance, ALB is the clear winner with 104.1% gains versus FMC’s 18.4%. But which of these stocks is a better pick now? Let us find out.

Latest Movements

FMC has recently been recognized with top honors in the Best R&D Pipeline and Best Biological Product categories a t the Crop Science Forum & Awards 2020.This will likely raise the company’s profile further with investors along with potential market opportunities for the company and allow its robust product portfolio to stand out in the market.

FMC is launching Isoflex active, the first new breakthrough herbicide in over 30 years, in early 2021 in Australia. The product is scheduled to be launched in other countries in the coming years after receiving regulatory approvals. This product innovation will help the company significantly expand its market operations worldwide.

On November 19, ALB announced that it will join as a founding member the U.S.-based Zero Emission Transportation Association, which will advocate for national policies to enable the full adoption of EV and reduce carbon emission. This will strengthen the company’s position as a major producer of lithium, actively pursuing a sustainable approach to manage its diverse global footprint.

Recent Financial Results

10 STOCKS TO SELL NOW!

In the third quarter ended September 30, 2020, FMC’s revenue surged 7% year-over-year to $1.08 billion, driven primarily by strong herbicide and fungicide sales in North America. The company’s adjusted EPS has grown30% year-over-year to $1.22.

FMC’s organic sales have grown 15% year-over-year. In Asia, its revenue has increased 16% year-over-year, and 19% excluding FX over this period. GAAP net income rose 25% from the year-ago value to $112 million, while its adjusted EBITDA grew 25% from the prior-year quarter to $263 million.

ALB’s Fine Chemistry Services (FCS) business revenue for the quarter ended September 30, 2020 have grown 45.2% year-over-year to $46.11 million. The company’s adjusted EBITDA, under this segment, grew 139.1% from the year-ago value to $25 million.

Past and Expected Financial Performance

FMC’s revenue and EBITDA grew at a CAGR of 21.9% and 35%, respectively, over the past three years. The company’s total assets grew at a CAGR of 17.3% over this period.

Analysts expect the company’s revenue to increase 6.1% next year, and its EPS is expected to grow 12.9% next year.

ALB’s revenue and EBITDA have grown at a CAGR of 3.7% and 3.1%, respectively, over the past three years. The CAGR of the company’s total assets has been 10.8%.

Analysts expect the company’s revenue to increase 3.3% next year and its EPS is expected to grow 2.8% next year.

Profitability

FMC’s trailing-12-month revenue is 1.45 times ALB’s. Moreover, FMC is more profitable, with a gross profit margin of 44.9% versus ALB’s 33%.

However, ALB’s net income margin of 11.8% compares favorably with FMC’s 10.6%.

Valuation

In terms of trailing-12-month Price/Cash Flow, FMC is currently trading at 21.03x, 10.3% more expensive than ALB, which is currently trading at 19.07x. Though FMC is less expensive in terms of trailing-12-month EV/Sales (3.84x versus 5.89x), its trailing-12-month Price to Book of 5.04x is 30.6% higher than ALB’s 3.86x.

Thus, ALB is the more affordable stock here.

POWR Ratings

Both FMC and ALB are rated “Strong Buy” in our proprietary POWR Ratings system. Here are how the four components of overall POWR Rating are graded for FMC and ALB:

FMC has an “A” for Trade Grade and Buy & Hold Grade, a “B” for Industry Rank, and a “C” for Peer Grade. In the 69-stock Chemicals industry, it is ranked #6.

ALB has an “A” for Trade Grade, Buy & Hold Grade and Peer Grade, and a “B” for Industry Rank. It is ranked #4 out of 69 stocks in the same industry.

The Winner

Both FMC and ALB are good investment bets considering their market dominance and continued expansion. However, ALB appears to be a better buy because it is a cheaper investment option for riding the industry’s strong growth potential.

Want More Great Investing Ideas?

9 “MUST OWN” Growth Stocks for 2021

5 WINNING Stocks Chart Patterns

7 Best ETFs for the NEXT Bull Market

ALB shares were trading at $150.99 per share on Monday afternoon, up $1.35 (+0.90%). Year-to-date, ALB has gained 110.22%, versus a 17.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...