The Pilbara Minerals Ltd (ASX:PLS) share price is lower 25.1% since the start of 2024. The ASX Ltd (ASX:ASX) share price is 15.7% off its 52-week low.
PLS share price in focus
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 find, dig up, and sell spodumene concentrate (a fancy word for rocks with lithium in them). 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 steelmaker.
Demand for lithium has skyrocketed in recent years on the back of developments in electric vehicles and renewable energy technology. Bullish investors would call Pilbara a ‘pure play’ investment in demand for green tech. 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.
ASX shares
ASX Limited operates Australia’s primary national securities exchange. This includes the provision of securities exchange services, derivatives exchange services, central counterparty clearing services, and registry, settlement, and delivery-versus-payment clearing financial products.
The company provides access to a variety of different products, including shares, futures, exchange traded funds (ETFs) managed funds and real estate investment trusts (REITs).
ASX operates at the heart of the Australian financial markets. It oversees compliance for listed companies and aims to promote a high standard of corporate governance and a fairer playing field for retail investors.
PLS share price valuation
As a growth company, one way to put a broad estimate 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, compared to its 5-year average of 3.49x, meaning its shares are trading below their historical average. Please keep in mind that context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric.
The ASX share price currently trades at a price-sales ratio of 7.66x, which compares to its 5-year long-term average of 8.12x. So, ASX shares are trading below their historical average. However, a simple multiple like this should only be the start of your research. Our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like ASX Ltd.
