PLS share price
Pilbara Minerals is a leading ASX-listed lithium company, owning 100% of the world’s largest, independent hard-rock lithium operation, Pilgangoora, which it acquired in 2014.
Pilbara’s primary business is to, put simply, find, dig up and sell spodumene concentrate. It sells its concentrate through “offtake” agreements and spot sales on the Battery Material Exchange (BMX) platform. A good example of an offtake partner is Great Wall (the Chinese car company) or POSCO, a South Korean company.
Pilbara has overcome significant hurdles to become a leader in lithium mining in Australia. However, as a commodities producer, its revenue is still at the mercy of (sometimes dramatic) fluctuations in the price of spodumene in the global market. Even still, bulls would say it’s a ‘pure play’ investment on demand for electric vehicles and battery tech.
While it may be large, Pilbara Minerals Ltd is a growth stock, and so it requires a different set of rules and may not be simple hard to value, at times. Studies have shown that over 5-10+ years, it’s top-line revenue growth which explains a stock’s performance. That’s why it’s good to see Pilbara Minerals Ltd is able to growth revenue at 185.3%, a good clip.
WES share price
Founded in 1914, Wesfarmers is an Australian conglomerate headquartered in Perth. It mainly has operations across Australia and New Zealand, operating in retail, chemical, fertiliser, industrial and safety products.
It’s easy to think of Wesfarmers like a publicly listed private equity company. It has a long history of buying businesses, benefitting from their cash flows, re-investing in them and then selling them for a more attractive price. A good example of this might be Coles Group, which is bought in 2007 and spun out in 2018. However, by far (over 50%) of the company’s operating profit comes from Bunnings, the #1 hardware and home improvement business in Australia. It bought the remaining 52% of Bunnings that it didn’t own in 1994 for $594 million. Other brands include Kmart, Target, Officeworks, Blackwoods and Priceline Pharmacy.
Wesfarmers has long been considered a leading blue chip stock for the average ASX share portfolio. Wesfarmers has quality assets such as Bunnings, Kmart and Officeworks and pays a consistent dividend to its shareholders.
Share price valuation
As a growth company, the way to put a rough forecast on the PLS share price could be to compare its price-to-sales multiple over time. Currently, Pilbara Minerals Ltd shares have a price-sales ratio of 2.21x, which compares to its 5-year average of 6.53x, meaning its shares are trading below their historical average. Please keep in mind that context is important – and this is just one valuation technique. I wouldn’t make a decision based on one metric.
Since it is a more mature-style business, the WES share price is offering a historical dividend yield of around 2.72%, which compares to its 5-year average of 3.84%. The Rask websites, especially our Rask Education platform, offer free tutorials explaining Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). Both of these models would be a better way to value the WES share price.
