What is LTHM's Intrinsic value?

Livent Corp (LTHM) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Livent Corp's estimated intrinsic value ranges from $28.06 to $42.19 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $42.19 +155.5%
Discounted Cash Flow (5Y) $28.06 +70.0%
Dividend Discount Model (Multi-Stage) $30.36 +83.9%
Dividend Discount Model (Stable) $30.59 +85.3%

Is Livent Corp (LTHM) undervalued or overvalued?

With the current market price at $16.51, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Livent Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.75 0.79
Cost of equity 7.3% 9.3%
Cost of debt 4.5% 6.8%
Tax rate 18.0% 21.4%
Debt/Equity ratio 0.08 0.08
After-tax WACC 7.0% 9.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $813 (FY12-2022) to $2,153 (FY12-2032)
  • Net profit margin expansion from 34% to 34%
  • Capital expenditures maintained at approximately 36% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $28 $5,179M 79.5%
10-Year Growth $42 $7,721M 65.1%
5-Year EBITDA $67 $12,159M 91.3%
10-Year EBITDA $79 $14,339M 81.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.3%
  • Long-term growth rate: 2.0%
  • Fair value: $30.36 (83.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 7.3% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $18 to $44
  • Selected fair value: $30.59 (85.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $2970M
Enterprise Value $3101M
Trailing P/E 7.92
Forward P/E 9.42
Trailing EV/EBITDA 15.50
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.08

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $12.66
Discounted Cash Flow (5Y) 28% $7.02
Dividend Discount Model (Multi-Stage) 22% $6.07
Dividend Discount Model (Stable) 17% $4.59
Weighted Average 100% $33.70

Investment Conclusion

Based on our comprehensive valuation analysis, Livent Corp's weighted average intrinsic value is $33.70, which is approximately 104.1% above the current market price of $16.51.

Key investment considerations:

  • Strong projected earnings growth (34% to 34% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)

Given these factors, we believe Livent Corp is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.