LyondellBasell Industries Stock To $30?

LyondellBasell Industries (LYB) stock has fallen 6.2% during the past day, and is currently trading at $43.16. Our multi-factor assessment suggests that it may be time to sell LYB stock. We have, overall, a pessimistic view of the stock, and a price of $30 may not be out of reach. We believe there is a lot to fear in LYB stock given its overall Very Weak operating performance and financial condition. In addition, keeping in mind its High valuation, we think that the stock is Very Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $14 Bil in market cap, LyondellBasell Industries provides chemicals and materials including olefins, polyolefins, engineered plastics, and refined oil products across multiple international markets.

[1] Valuation Looks High

This table highlights how LYB is valued vs broader market. For more details see: LYB Valuation Ratios

[2] Growth Is Very Weak

• LyondellBasell Industries has seen its top line shrink at an average rate of -12.9% over the last 3 years
• Its revenues have fallen -6.3% from $38 Bil to $35 Bil in the last 12 months
• Also, its quarterly revenues declined -11.8% to $7.7 Bil in the most recent quarter from $8.7 Bil a year ago.

This table highlights how LYB is growing vs broader market. For more details see: LYB Revenue Comparison

[3] Profitability Appears Very Weak

• LYB last 12 month operating income was $1.5 Bil representing operating margin of 4.3%
• With cash flow margin of 6.7%, it generated nearly $2.4 Bil in operating cash flow over this period
• For the same period, LYB generated nearly $261 Mil in net income, suggesting net margin of about 0.7%

This table highlights how LYB profitability vs broader market. For more details see: LYB Operating Income Comparison

[4] Financial Stability Looks Weak

• LYB Debt was $13 Bil at the end of the most recent quarter, while its current Market Cap is $14 Bil. This implies Debt-to-Equity Ratio of 83.6%
• LYB Cash (including cash equivalents) makes up $1.7 Bil of $35 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.8%

[5] Downturn Resilience Is Very Weak

LYB has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• LYB stock fell 35.7% from a high of $112.30 on 7 June 2022 to $72.20 on 26 September 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $105.86 on 3 April 2024 , and currently trades at $43.16

 
2020 Covid Pandemic

• LYB stock fell 63.1% from a high of $94.48 on 1 January 2020 to $34.90 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 6 January 2021

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read LYB Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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