Simple Concepts Research Group

Should Investors Sell Their Shares of LSB Industries (NYSE: LXU)?

by | Aug 22, 2022 | 52 Week Lows, Materials

lsb industries lxu stock valuation

LSB Industries (LXU) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for LSB Industries (LXU) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

LSB Industries Fundamentals

LXU Stock Rating

Stock Price Target: $24.37

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for LSB Industries in comparison to the Diversified Chemical industry and the S&P 500.

LSB Industries is a Small Cap company with a Market Cap of $1.24B.

How are investors using LSB Industries earnings yield to assess the company?

LSB Industries (LXU)_ Earnings Yield in Comparison to the Chemical Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for LSB Industries is 23.64%, in comparison to 4.68% for the S&P 500 and 2.98% for the 10-year treasury bond. The median earnings yield for the Diversified Chemical industry is 11.54%.

What does LSB Industries Price-to-Earnings Ratio (P/E) tell investors about the company?

LSB Industries (LXU)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Chemical Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

LSB Industries does not currently have a reported P/E. The P/E for the Diversified Chemical industry is 12.03 and the P/E for the S&P 500 is 21.37.

What is the current Price-to-Sales Ratio (P/S) for LSB Industries?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

LSB Industries is currently trading at a P/S of 1.25. The P/S for the Diversified Chemical industry is 0.98 and the P/S for the S&P 500 is 2.62.

How does LSB Industries Price-to-BookRatio (P/B) compare to the Diversified Chemical industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

LSB Industries P/B ratio is 2.71. The P/B for the Diversified Chemical industry is 2.62 and the P/B for the S&P 500 is 4.20.

How attractive is LSB Industries Return on Invested Capital (ROIC) to investors?

LSB Industries (LXU)_ Return on Invested Capital in Comparison to the Chemical Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

LSB Industries ROIC is currently 17.38% in comparison to 9.87% for the Diversified Chemical industry and 10.10% for the S&P 500.

LSB Industries (LXU)_ Price Target & 52-Week Price Range

How has LXU stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, LSB Industries has traded between the range of $6.07 and $27.45.

The current Analyst Price Target for LSB Industries is $24.37.

What is LSB Industries YOY Performance in comparison to its industry and the total market?

The YOY performance for LSB Industries is 109.60%. The Diversified Chemical industry has a YOY performance of -4.78% in comparison to the YOY S&P 500 performance of -4.94%.

LSB Industries (LXU)_ YOY Performance in Comparison to the Chemical Industry and the S&P 500

Recent Financial Results

  • Net sales of $284.8M compared to $140.7M in the second quarter of 2021
  • Adjusted EBITDA of $158.1M compared to $46M in the second quarter of 2021
  • Adjusted EPS of $1.22 in the second quarter of 2022
  • Cash Flow from Operations of $135.3M and Capital Expenditures of $8.2M
  • Total liquidity of over $500M as of June 30, 2022
  • Authorized and commenced share repurchases under a $50M buyback program
  • Announced feasibility study for a green ammonia project at Pryor Facility

Stock Price Target: $24.37

Company Overview

LXU Stock Rating

LSB Industries, Inc. engages in the manufacture, marketing, and sale of chemical products. The company provides nitrogen-based fertilizers, such as ammonia, fertilizer grade ammonium nitrate (HDAN), and urea ammonia nitrate for fertilizer and fertilizer blends for corn and other crops, and NPK fertilizer blends applications.

It sells its products through distributors, as well as directly to end customers in the United States, Mexico, and Canada. The company serves to the agricultural, industrial, and mining markets. LSB Industries, Inc. was founded in 1968 and is headquartered in Oklahoma City, Oklahoma.

Be sure to add LSB Industries (LXU) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.