$7.00
$19.30
bear $7.00
base $15.10
bull $19.30
margin of safety $8.50
market price* $35.05
Element Solutions makes specialty chemicals and materials that customers consume in their production lines. About 70% of 2025 sales ($2.55 billion) came from Electronics (solder pastes and assembly materials, circuit-board plating chemistries, and semiconductor packaging materials, under brands such as Alpha, Kester and MacDermid) and about 30% from Specialties (industrial and consumer surface-finishing and related chemistries). Because these products are a small cost to the customer but sit inside its manufacturing process, revenue recurs as long as the customer keeps producing. About 79% of sales are outside the United States, and China is a large operating base (it accounts for about $47 million of the $99 million of income taxes paid in 2025). Owner earnings. We measure what the business earns for shareholders as operating cash flow, minus working-capital swings, minus stock compensation, minus the part of capital spending needed just to stay in place. On that basis owner earnings per share were $0.78 in 2019, $0.99 in 2020, $1.20 in 2021, $1.35 in 2022, $1.12 in 2023, $1.21 in 2024 and $1.03 in 2025. We use 2020 to 2025 as the window (2019 was distorted by the January 2019 sale of the Arysta business and heavy pre-refinancing interest), and the median is about $1.16. Two adjustments: 2025 was depressed by a $59 million stock grant charge (versus $15 million in 2024) and a $78 million working-capital build, and 2022 was flattered by a $99 million working-capital add-back; both wash out in a median. We then trimmed the anchor about 4% to $1.12, because the flexographic printing-plate business (MacDermid Graphics Solutions), sold for $320 million on February 28, 2025, sat inside most of those years and cost about $26 million of annual earnings before interest, tax and depreciation. Growth check: owner earnings per share fell about 15% in 2025 (from $1.21 to $1.03). The base case starts at $1.12, above the 2025 print, because the 2025 drop came from the one-off stock grant and inventory and receivable build (much of it metal, since about half of Assembly Solutions sales is metal cost passed through to customers), not from lower operating profit: reported adjusted EBITDA rose 2% to $547.6 million, and first-quarter 2026 net income of $55.9 million compares with roughly $31 million in the first quarter of 2025 after removing the printing-plate sale gain. First-quarter 2026 operating cash flow was negative $66.6 million on further receivable and inventory growth, which we treat as working-capital timing, but it is worth watching. Recent acquisitions. In January and February 2026 the company bought EFC Gases & Advanced Materials (about $369 million, cash) and Micromax, electronic inks and pastes (about $500 million, funded by a new $450 million term loan plus revolver borrowings). The filings do not give either business's earnings, so we credit no earnings from them and also do not add the extra interest and lost interest income; we treat the two as roughly offsetting. If the acquired earnings prove well above the roughly $50 million a year of added financing cost, our figures are conservative; if they fall short, they are too high. Bought growth in $500 million steps is not a repeatable small-increment process, so no acquisition growth is credited. Base case: about $15.1 per share. Owner earnings stay flat at $1.12 for 20 years, then fade evenly to zero over the next 20 years. Flat, not growing, because we can name no secured growth: the six-year record shows no trend (range $0.99 to $1.35), and demand growth in datacenter and AI-related electronics, while mentioned by management, is not contracted. Flat for 20 years is supported by the fact that these chemistries are specified into customers' processes and by earnings that held at $1.12 in 2023, when sales fell 8.5%. The fade reflects that about $151 million a year of depreciation and amortization, mostly from acquired customer relationships and technology, is added back in cash flow, so we do not assume permanence. Bear case: about $7.0 per share. Owner earnings of $0.75 (below the 2020 trough of $0.99) for 10 years, then fading to zero over 10 more. Named drivers: electronics demand is cyclical (2023 sales fell 8.5%); debt is heavy, with $836 million of term loans, $800 million of 3.875% notes due September 2028 that will likely refinance at a much higher rate, plus the new $450 million term loan; and elevated stock compensation. Bull case: about $19.3 per share. Owner earnings return to $1.35, the level already reached in 2022, for 25 years, then fade over 20. No growth beyond levels already demonstrated is assumed. What would make this wrong: the acquired businesses proving much better or worse than assumed, sustained higher interest costs, the rest of Assembly Solutions' metal pass-through not holding, or a prolonged electronics downturn. Note also that the working-capital swings in cash flow could not be fully explained from the filings for the first quarter of 2026. The margin-of-safety price is $8.50, about 44% below the base case and only about 20% above the bear case, reflecting a leveraged, cyclical business with unproven acquisition economics.