The Lubrizol Corporation (LZ, Financial) is a specialty chemical company. The company supplies technologies and produce additives, ingredients, resins and compounds. Its products are used in a range of applications and are sold in markets, such as those for engine oils, specialty driveline lubricants and metalworking fluids, as well as markets, such as those for personal care and over-the-counter pharmaceutical products, performance coatings, medical products and compressor lubricants. Its specialty chemical products also are used in a variety of industries, including the construction, sporting goods, medical products and automotive industries
Pricing Power
Pricing power is one of the most important points in evaluating the business. Lubrizol got the power to raise prices without losing business to a competitor. Lubrizol has raised its product price 18 times since 2004. Look at the graph below.
Lubrizol's ability to pass on input costs is superb due to working with customers as early in advance as they can in a collaborative manner. It also helps that their customers have also been able to successfully raise prices as well.
Five-Year Summary
Lubrizol sales look good but slightly decreased in 2008 because of rapidly escalating raw material costs, and its EPS increased 47% in 2010, improved to more than 300% in five years.
Industry Strength
NewMarket Corp. (NEU) and Innospec Inc. (IOSP) are two of Lubrizol's closest public competitors. Below is a chart of the comparative performances of each company.
Free Cash Flow
Free cash flow is one of the more important fundamental metrics in evaluating an equity investment.
Free cash flow to the firm (FCFF) represents the cash flow that a company generates in an accounting period, after paying operating expenses and making necessary expenditures. This cash flow represents the return to all providers of capital, whether debt or equity. It can be used to pay off debt, repurchase shares, pay dividends or be retained for future growth opportunities.
Lubrizol has very good free cash flow compared to its competitors
Conclusion: Lubrizol is a unique value stock.
This is not a recommendation to buy or sell shares of any securities discussed in this article. Please do your own research work.
Pricing Power
Pricing power is one of the most important points in evaluating the business. Lubrizol got the power to raise prices without losing business to a competitor. Lubrizol has raised its product price 18 times since 2004. Look at the graph below.
Lubrizol's ability to pass on input costs is superb due to working with customers as early in advance as they can in a collaborative manner. It also helps that their customers have also been able to successfully raise prices as well.
Five-Year Summary
Lubrizol sales look good but slightly decreased in 2008 because of rapidly escalating raw material costs, and its EPS increased 47% in 2010, improved to more than 300% in five years.
YEAR | SALES | SALES % IN/DE | EPS | EPS % IN/DE | LONG TERM DEBT | DEBT % IN/DE | O/S SHARES |
10-Dec | 5,417.80 | 18% | 10.64 | 47% | 1,351.60 | -3% | 64 MIL |
9-Dec | 4,586.30 | -9% | 7.26 | 7.26 | 1,390.30 | 46% | 68 MIL |
8-Dec | 5,027.80 | 12% | -0.97 | -0.97 | 954.6 | -22% | 67.3 MIL |
7-Dec | 4,499.00 | 11% | 4.05 | 4.05 | 1,223.90 | -20% | 68.4 MIL |
6-Dec | 4,040.80 | 12% | 2.51 | 2.51 | 1,538.00 | -8% | 69 MIL |
Industry Strength
NewMarket Corp. (NEU) and Innospec Inc. (IOSP) are two of Lubrizol's closest public competitors. Below is a chart of the comparative performances of each company.
COMPANY | NET PROFIT MARGIN | OPR PROFIT MARGIN | ||
Q1 Mar '11 | 2010 | Q1 Mar '11 | 2010 | |
lubrizol | 11.45% | 13.82% | 16.80% | 20.06% |
NewMarket Corp | 9.76% | 9.85% | 15.37% | 15.98% |
Innospec, Inc | 11.60% | 10.79% | 12.90% | 10.57% |
Free Cash Flow
Free cash flow is one of the more important fundamental metrics in evaluating an equity investment.
Free cash flow to the firm (FCFF) represents the cash flow that a company generates in an accounting period, after paying operating expenses and making necessary expenditures. This cash flow represents the return to all providers of capital, whether debt or equity. It can be used to pay off debt, repurchase shares, pay dividends or be retained for future growth opportunities.
Lubrizol has very good free cash flow compared to its competitors
LUBRIZOL | NEU | IOSP | |
2010 | $ 406.4 MIL | $ 64.9 MIL | $ 49.4 MIL |
2009 | $ 719.6 MIL | $ 118.96 MIL | $ 79 MIL |
2008 | $ -128.6 MIL | $ -83.9 MIL | $ 2.9 MIL |
2007 | $ 73.3 MIL | $ 63.38 MIL | $ 5.1 MIL |
2006 | $ 414.6 MIL | $ -2.19 MIL | $ 26.9 MIL |
Conclusion: Lubrizol is a unique value stock.
This is not a recommendation to buy or sell shares of any securities discussed in this article. Please do your own research work.
