- If you are looking at LyondellBasell Industries and asking whether the current share price reflects fair value, this article is written for you.
- The stock recently closed at US$72.30, with returns of 7.7% over the past week, 25.5% over the past month, 62.9% year to date, 6.5% over one year, 4.5% over three years and a 4.6% decline over five years.
- Recent coverage of LyondellBasell has focused on its role as a major global chemicals and plastics producer, including how it is positioning its portfolio and capital allocation as industry conditions shift. This context has helped shape how investors interpret the recent share price moves and the potential risk and reward trade off.
- On our framework, LyondellBasell scores 5 out of 6 on valuation. You can see this in more detail in our valuation scorecard. Next, we will walk through the main valuation approaches we use and then finish with a perspective on a more rounded way to think about value.
Find out why LyondellBasell Industries's 6.5% return over the last year is lagging behind its peers.
Approach 1: LyondellBasell Industries Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a company might be worth by projecting its future cash flows and discounting them back to what they could be worth to investors today.
For LyondellBasell Industries, this model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $628.7 million. Analysts provide detailed forecasts for several years, and Simply Wall St then extrapolates further out. By 2035, these extended projections reach around $3.2 billion in free cash flow, with each year between now and then converted into today’s dollars using a discount rate.
Adding these discounted cash flows together gives an estimated intrinsic value of about $114.46 per share. When compared with the recent share price of $72.30, the model output indicates that the stock is trading at a 36.8% discount to this estimate based on this DCF view alone.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests LyondellBasell Industries is undervalued by 36.8%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.
Approach 2: LyondellBasell Industries Price vs Sales
For profitable companies, revenue based measures such as the price to sales, or P/S, ratio can be a useful sense check because they tie the share price back to the top line that ultimately supports earnings and cash flows. Investors usually expect higher P/S ratios when they see stronger growth potential or lower perceived risk, and lower P/S ratios when growth expectations are more muted or risks feel higher.
LyondellBasell Industries currently trades on a P/S ratio of about 0.77x. This sits below both the Chemicals industry average of around 1.07x and a peer average of about 0.84x. On the face of it, that points to a lower sales based valuation than many similar businesses.
Simply Wall St’s Fair Ratio for LyondellBasell, at roughly 1.07x, is a proprietary estimate of what the P/S could be given factors such as its earnings profile, industry, profit margins, market value and risk characteristics. This approach can be more tailored than a simple comparison with peers or the sector because it adjusts for company specific traits instead of assuming all firms deserve the same multiple. With the current 0.77x P/S sitting below the 1.07x Fair Ratio, the shares screen as undervalued on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your LyondellBasell Industries Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simply your story for LyondellBasell Industries tied directly to a set of numbers like fair value, future revenue, earnings and margins. You can compare these with others on the Simply Wall St Community page, see them in real time as fresh news or earnings adjust the forecasts, and use them to decide how the current price stacks up against different fair value views. For example, one investor might anchor on a more cautious US$38 fair value, while another might lean toward a much higher US$86.92 view. By seeing these different Narratives side by side, you can quickly judge which story about LyondellBasell Industries you think is more realistic and what that means for your own decisions.
For LyondellBasell Industries, however, we will make it really easy for you with previews of two leading LyondellBasell Industries Narratives:
🐂 LyondellBasell Industries Bull Case
Fair value: US$86.92
Current price vs this fair value: about 16.8% below the narrative fair value
Assumed revenue trend: 5.07% annual decline over the next 3 years
- Backers of this view focus on cost cuts, portfolio simplification and advanced recycling projects that they expect to support stronger margins and higher free cash flow over time.
- They work with analyst assumptions that margins could rise from 0.4% to 10.5% by 2028, with earnings at US$3.5b and a future P/E of 10.1x, which they see as consistent with the US$86.92 fair value.
- Supporters of this narrative point to long term demand for polymers, feedstock cost advantages outside Europe and the potential for buybacks and dividends, while still flagging risks around Europe, energy markets, circular plastics and global oversupply.
🐻 LyondellBasell Industries Bear Case
Fair value: US$38.00
Current price vs this fair value: about 90.3% above the narrative fair value
Assumed revenue trend: 3.16% annual decline over the next 3 years
- This view leans on concerns that tighter rules on plastics, higher carbon and compliance costs and growth in alternative materials could pressure demand and pricing for LyondellBasell's legacy products.
- The narrative works with assumptions of revenues at US$25.7b and earnings of US$1.6b by 2028, with an 11.1x P/E and an 8.8% discount rate, which together support a US$38.00 fair value.
- Even though it acknowledges cost advantages, recycling projects and portfolio actions, it treats oversupply, capital intensity and the risk of weaker long term cash generation as reasons to be cautious about paying well above this fair value.
Both of these Narratives take the same company data and reach very different conclusions, which is exactly the point. Your task is to decide which story feels closer to how you see LyondellBasell Industries and whether the current US$72.30 share price lines up with your version of fair value.
Curious how numbers become stories that shape markets? Explore Community Narratives
Do you think there's more to the story for LyondellBasell Industries? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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