Ecovyst Inc. (ECVT) stock intrinsic value fair value estimate & owner earnings analysis

Ecovyst is a North American sulfuric acid company. Its largest activity (about $361 million, or 50% of 2025 sales of $723.5 million) is regenerating spent sulfuric acid for oil refineries, which use it to make alkylate, a gasoline blending component. It also makes virgin sulfuric acid and derivatives for industrial, mining and automotive customers ($328 million of 2025 sales), treats hazardous waste and activates catalysts. The company describes itself as the largest North American recycler of sulfuric acid and operates nine plants, mostly on the Gulf Coast and in California. About 90% of 2025 sales were under contracts with raw-material cost pass-through clauses, and most contracts have take-or-pay volume protection or quarterly price adjustments. The company changed shape at the end of 2025. Effective December 31, 2025 it sold its Advanced Materials & Catalysts segment, including its Zeolyst joint venture, to Technip Energies for $556.0 million and used $465.0 million of the proceeds to repay its term loan. Total debt is now $397.1 million, and interest due over the next twelve months is $21.2 million, against net interest expense of $34.2 million in 2025. In May 2025 it also bought the sulfuric acid production assets at Waggaman, Louisiana for $41.5 million. Because the business now on offer is the sulfuric acid business alone, we value only the three years the filings restate on that basis (2023 to 2025) and do not use earlier years, which include the sold segment. How we measure earnings. We start from operating cash flow of the continuing business, remove the swings from receivables, inventories and payables, subtract stock compensation as a real cost, and subtract the capital spending needed to keep the plants running. Owner earnings were $44.4 million in 2023, $47.6 million in 2024 and $55.1 million in 2025 ($0.37, $0.41 and $0.48 per share). In 2025, capital spending was $70.4 million; we treated only $2.7 million of it as growth spending, because most of the 2025 sales increase was pass-through pricing rather than new volume (sales rose $125.2 million, of which $97.9 million was price, including about $77 million of higher sulfur costs passed to customers, and $27.3 million was volume). The middle of the three years, $47.6 million, is our starting level. We add $10.3 million a year for the interest saved from the debt repayment (the $13.0 million gap between 2025 net interest expense and the $21.2 million now due, taxed at 21%). That gives about $57.9 million, or $0.51 per share on roughly 112.5 million shares (111.8 million outstanding at year-end 2025 plus about 0.7 million of dilution). Amortization of acquired intangibles is about $10.8 million a year; it is added back because it is a sunk acquisition cost, and the wasting asset is small next to a plant base that is maintained through the capital spending we deduct. Trailing growth versus our assumption. Owner earnings rose about 16% in 2025 (about 17% per share). We assume 0% growth from here. We do not treat the 2025 rise as a trend: sales growth was largely pass-through pricing, and gross profit actually fell $5.3 million to $158.1 million: manufacturing costs rose $30.2 million (including fixed costs at Waggaman, inflation, maintenance and transportation) against $20.9 million of price gains (excluding sulfur) and $4.0 million from volume. We saw no contracted or repeatable step-up that we can point to, so no growth is credited. We also leave out any benefit from full-year Waggaman operations, refinery demand growth and share gains, because the filings give no figures that support them. Base case, about $6.88 per share. Earnings hold at about $0.51 per share for ten years, supported by long-standing customer relationships (the top ten average more than 50 years), take-or-pay protection and cost pass-through. After year ten we assume earnings fade by 3% a year rather than continue indefinitely, because nothing in the filings guarantees demand for refinery acid regeneration beyond the contracts' terms. Bear case, about $3.80 per share. Three disclosed risks are built in. First, regeneration contracts with major refiners can typically be terminated on one to two years' notice, and one customer was 12.3% of sales ($89 million) in 2025; losing that business at the company's 2025 gross margin of about 22% removes roughly $15.4 million a year after tax. (A second customer that was 11.8% of 2024 sales fell below 10% in 2025, showing how much the mix moves.) Second, the 2025 squeeze between rising manufacturing costs and price recovery repeats once, worth about $4.2 million a year after tax. Third, the term loan (due June 2031) is refinanced at rates two points higher; the company states that each one point costs about $4.0 million a year, so about $6.3 million after tax. Earnings fall to about $0.28 per share, followed by the same fade after year ten. Bull case, about $9.90 per share. The company's own levers work: contract price adjustments catch up with the 2025 cost increases (recovering the $5.3 million gross profit decline) and the $6.1 million of one-time Waggaman acquisition and integration costs does not recur, adding about $9.0 million after tax, or about $0.59 per share in total. Earnings then continue at that level without a fade because the plants and customer relationships persist, which is worth about $9.90 at a 6% required return. What could make this wrong. The main risk is concentration and contract termination: the top ten customers were about 61% of 2025 sales. Weaker refinery output of alkylate, or a customer's extended downtime (which held back regeneration volume in 2025), would reduce results. The company also has cash of $197.2 million, which we do not add separately because the interest it earns is already part of cash flow. About $142.7 million of tax-deductible intangibles and goodwill lower cash taxes while they last; when that benefit runs out, cash taxes will be higher. The margin-of-safety price is about $4.10 per share, a discount of roughly 40% to the base case, because the contracts can be terminated, customers are concentrated, and the company still carries variable-rate debt.