With electric vehicles (EVs) gobbling up shares of new cars sold, the critical resource lithium has been on many investors' minds -- for good reason. With demand through the roof, the high price for this key ingredient in manufacturing batteries has been a sore spot for automakers. Tesla itself has been hinting that it might buy a lithium miner, and reports indicate it could make an offer for tiny Sigma Lithium (which is in preproduction and doesn't generate sales yet) as it looks for ways to keep costs down.

All of this focus on battery material mining is great news for one of the leaders in the industry, Albemarle (ALB 0.31%). The company just released its fourth-quarter 2022 earnings and recently provided a huge update to its five-year guidance. Shares are down over 20% from their highs reached in late 2022. Is it time to buy?

Albemarle's epic conclusion to 2022

As was hinted at a few weeks ago at an investor event, Albemarle delivered impressive growth in the final months of 2022. Revenue was up 193% year over year to $2.6 billion, benefiting from some of its mines ramping up toward full production in the last year.

Even better, net income was $1.13 billion (compared to a net loss of $3.8 million in the same period in 2021). That represents a net profit margin of 43%. No wonder Tesla and other automakers want a piece of the lithium mining and refining pie!

Adjusted for one-time items, earnings per share (EPS) was $8.62 in Q4 2022, up from just $1.01 last year.

For 2023, Albemarle expects revenue to be 55% to 75% higher than in 2022 and adjusted EPS to be up 50%. Shares trade for just 11 times trailing-12-month earnings. If Albemarle can continue to grow at a double-digit percentage clip, as it forecasted at its investor event in January 2023, the stock could be quite the value.

There's lithium, and then there's vertically integrated lithium

This top lithium mining operation comes with risk, though, in the form of intense competition. There's a long list of small preproduction miners trying to get production up and running to take advantage of the EV boom. And with automakers struggling to manufacture these new technology-powered vehicles at a profitable scale, there's interest in sourcing lithium on the cheap from these smaller mining upstarts.

Albemarle has a plan to fight back with some vertical integration of its own. It's coming at the market from the opposite end of Tesla and other automakers, but growing beyond just lithium mining could be key. Albemarle expects it will rack up $1.7 to $1.9 billion in capital expenditures in 2023, up from $1.26 billion in 2022 (thus the outlook for lower adjusted EPS growth compared to revenue growth this year).

In other words, sky-high profit margins could be taking a step back for the time being. Albemarle isn't just spending to bring new mines online. It's also investing in new lithium conversion facilities (that get the raw lithium ready for use in EVs, energy grid batteries, etc.) in the U.S., Europe, and Australia. Albemarle has also acquired a site in North Carolina for its future Technology Park for lithium materials research and development. Investment in that site and related technology will also increase capital spending in 2023.

Improving base material quality could help differentiate Albemarle from the pack, as well as help justify its high-profit pricing on lithium for the EV and other battery markets.

Time will tell how the lithium mining industry will shake out, but Albemarle is standing out as a winner at this early stage. It expects to continue its hot growth in 2023 and is investing some of its early profits into some value-added projects that extend its reach beyond just basic lithium extraction.

Even when accounting for the risk of competitors (including some automakers) wanting to get in on the action, Albemarle stock looks like a great buy at today's price.