The Pilbara Minerals Ltd (ASX:PLS) share price is down around 17.8% since the start of 2024. The Zip Co Ltd (ASX:ZIP) share price is about 957.7% 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.
ZIP shares
Zip Co was founded in 2013 and is a financial technology company. It offers a buy-now-pay-later (BNPL) service that is popular among retail consumers.
Zip allows customers to purchase items immediately and repay them over interest-free instalments.
Zip operates on a global scale with over 79,300 retail partners and 6 million customers. In September 2020, Zip acquired US-based BNPL company Quadpay to further establish itself in the US market.
PLS share price valuation
As a growth company, one way to put a broad projection 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 6.96x, compared to its 5-year average of 20.35x, meaning its shares are trading below their historical average. This could mean that the share price has fallen, or sales have increased. In the case of PLS, revenue has been growing over the last 3 years. 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 ZIP share price currently trades at a price-sales ratio of 4.14x, which compares to its 5-year long-term average of 5.81x. So, ZIP shares are trading below their historical average. However, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! Just remember there are many different ways to value a share, like Zip Co Ltd.
