LyondellBasell Industries N.V. (NYSE:LYB)

The valuation metrics for the five-year period ending December 31, 2018, indicate an overall trend of multiple contraction. While several ratios experienced mid-period growth, the terminal values in 2018 generally represent the lowest or near-lowest points of the period, signaling a reduction in market valuation relative to fundamental financial performance.

Price to Earnings (P/E)

The P/E ratio exhibited volatility throughout the period, starting at 10.28 in 2014 and concluding at 7.01 in 2018. A notable decrease occurred in 2015 to 7.52, followed by a recovery to 9.75 in 2016, before entering a steady decline over the final two years.

Price to Operating Profit (P/OP)

The P/OP ratio followed a trajectory closely aligned with the P/E ratio, beginning at 7.48 and ending at 6.28. The multiple reached a period low of 5.50 in 2015 and a peak of 8.01 in 2017 before contracting in the final year.

Price to Sales (P/S)

A period of expansion is observed between 2014 and 2016, with the P/S ratio rising from 0.94 to 1.28. This valuation remained relatively stable through 2017 at 1.27, followed by a sharp correction in 2018, where the ratio fell to 0.84.

Price to Book Value (P/BV)

The P/BV ratio demonstrates a significant downward trend in the latter half of the analysis period. After reaching a peak of 6.18 in 2016, the ratio declined to 4.89 in 2017 and dropped further to 3.20 by the end of 2018, marking the most substantial contraction among the observed valuation multiples.

The Price to Earnings (P/E) ratio exhibits an overall downward trajectory over the five-year period from 2014 to 2018, contracting from 10.28 to 7.01. This trend indicates a general compression in the valuation multiple assigned to the company's earnings over the analyzed timeframe.

Price to Earnings (P/E) Ratio Trends

The P/E ratio experienced significant volatility, dropping sharply to 7.52 in 2015 before recovering to 9.75 in 2016. However, a subsequent decline occurred over the following two years, with the ratio ending at its period low of 7.01 in 2018. This suggests a decreasing market premium relative to the company's net income.

Earnings Per Share (EPS) Growth

Earnings per share demonstrated a consistent upward trend, rising from 8.75 in 2014 to 12.63 in 2018. Despite a slight dip in 2016 to 9.53, the overall growth in EPS indicates a strengthening of the company's profitability over the observed period.

Share Price Correlation

The share price fluctuated without a clear linear trend, peaking at 110.83 in 2017 before declining to 88.50 in 2018. The decline in the P/E ratio is primarily driven by the fact that share price growth did not keep pace with the growth in earnings. By 2018, the combination of the highest recorded EPS and a reduced share price resulted in the lowest P/E multiple of the period.

Valuation Divergence

A divergence is observable between fundamental earnings performance and market valuation. While profitability increased by approximately 44% between 2014 and 2018, the market valuation multiple compressed, indicating that investors were willing to pay less for each dollar of earnings at the end of the period than at the beginning.

The analysis of the price-to-operating profit (P/OP) ratio between 2014 and 2018 reveals a period of valuation volatility characterized by fluctuations in share price against a relatively stable backdrop of operating performance.

Share Price Performance

The share price exhibited significant volatility over the five-year period. After a decline from 89.94 US$ in 2014 to 77.93 US$ in 2015, a strong upward trend occurred, peaking at 110.83 US$ in 2017. This growth was reversed in 2018, with the price retreating to 88.50 US$, near 2014 levels.

Operating Profit Stability

Operating profit per share remained remarkably consistent, ranging between 12.02 US$ and 14.16 US$. Despite minor year-over-year fluctuations, the profit metric showed a general resilience, ending the period at 14.09 US$ in 2018, which represents a modest increase over the 2014 starting point.

P/OP Ratio Dynamics

The P/OP ratio fluctuated in alignment with share price movements rather than operating profit changes. The ratio reached its lowest point of 5.50 in 2015, driven by a decrease in share price occurring simultaneously with an increase in operating profit per share. Conversely, the ratio peaked at 8.01 in 2017, reflecting a period where market valuation expanded more rapidly than underlying operational earnings. By 2018, the ratio compressed to 6.28 as the share price declined while operating profit per share continued to climb.

Overall, the divergence between the stable operating profit and the volatile share price indicates that the changes in the P/OP multiple were primarily driven by market sentiment and external valuation pressures rather than shifts in the company's fundamental operating efficiency.

An analysis of the price-to-sales (P/S) ratio from 2014 to 2018 reveals a period of volatility characterized by an initial upward trend followed by a significant correction. The valuation multiple fluctuated between a low of 0.84 and a high of 1.28 over the five-year period.

P/S Ratio Trajectory

The P/S ratio exhibited a steady increase from 0.94 in 2014 to a peak of 1.28 in 2016. This growth in the multiple was primarily driven by a contraction in sales per share, which declined from 95.59 in 2014 to a low of 72.50 in 2016, occurring while the share price recovered from its 2015 dip. The ratio remained nearly flat in 2017 at 1.27.

Valuation Compression

A sharp decline in the P/S ratio is observed in 2018, falling to 0.84. This compression was the result of two converging factors: a decrease in the share price to 88.50 and a substantial increase in sales per share to 105.09, which represented the highest sales efficiency in the analyzed period.

Correlation between Price and Revenue

A divergence is noted between share price and sales per share between 2016 and 2017, where the share price reached its peak of 110.83 while sales per share were still recovering, leading to higher price multiples. In 2018, the relationship inverted as the market valuation decreased despite the company achieving its strongest sales per share figures of the five-year sequence.

Between 2014 and 2018, the valuation of common stock exhibited a notable divergence between market pricing and book value, resulting in a significant compression of the Price to Book Value (P/BV) ratio.

Share Price Performance

The market price per share experienced volatility throughout the period. After starting at 89.94 US$ in 2014, the price reached a peak of 110.83 US$ in 2017 before declining to 88.50 US$ by the end of 2018.

Book Value per Share (BVPS) Growth

BVPS remained relatively stagnant between 2014 and 2016, moving from 17.42 US$ to 15.02 US$. However, a strong upward trend emerged in the latter part of the period, with the value rising to 22.68 US$ in 2017 and reaching a period high of 27.64 US$ by December 31, 2018.

Price to Book Value (P/BV) Dynamics

The P/BV ratio peaked in 2016 at 6.18, indicating the highest market premium relative to book value. Following this peak, a consistent downward trend occurred, with the ratio falling to 4.89 in 2017 and further contracting to 3.20 in 2018.

The observed reduction in the P/BV ratio suggests a shifting valuation perspective. The compression was driven by the simultaneous impact of a decreasing share price and a rapidly increasing book value per share toward the end of the five-year cycle, indicating that the market paid a significantly lower multiple for the company's accounting value in 2018 than in previous years.