Although the burgeoning electric vehicle industry organically excites investors, the reality is that infrastructural plays may be more reliable in the long run. Therefore, those who anticipate the broader electrification of mobility may want to focus their attention on undervalued lithium stocks to buy now.
First, the companies that mine and produce lithium enjoy a remarkably strong demand profile. As Time recently stated, prices for the underlying commodity are up 400%. Further, experts note that supply will get worse before it gets better, creating significant implications for the EV market. Since EVs can’t go anywhere without lithium, this dynamic fosters a cynically compelling backdrop for undervalued lithium stocks to buy now.
Second, while acquiring individual EV manufacturers may yield the greatest profitability potential, this strategy comes with one major caveat: you’ve got to guess correctly. With the number of sector participants constantly rising, it’s difficult to predict who will ultimately come out on top.
But with undervalued lithium stocks to buy, you’re dealing with broader needs rather than specific consumer tastes. Therefore, this indirect approach to EVs could drive more confidence to investors.
|SQM||Sociedad Química y Minera de Chile S.A.||$88.76|
|PILBF||Pilbara Minerals Limited||$1.73|
Undervalued Lithium Stocks: Livent (LTHM)
Billed as a lithium technology partner, Livent (NYSE:LTHM) leverages its material science expertise to provide solutions across various industries and applications. Primarily, the company is focused on energy storage and battery systems, providing ultra-pure lithium hydroxide monohydrate. In addition, the company delivers polymer products that empower industrial applications.
While Livent suffered an off-year because of the coronavirus pandemic, it’s rapidly making up for lost time. In 2021, the company generated $420.4 million in revenue, which was up over 8% from 2019’s result. Further, in the first quarter of 2022, Livent posted sales of $143.5 million, representing a gain of over 56% against the year-ago level.
Compared to other companies in the space, Livent is putting up solid metrics against key benchmarks. For instance, its net margin of 11.6% is notably above the chemicals industry median of 7%. While shares are down about 7% year-to-date, LTHM makes an interesting case for undervalued lithium stocks to buy as demand for targeted solutions pick up.
Sociedad Quimica y Minera de Chile (SQM)
One of the powerhouses in the lithium arena, Sociedad Quimica y Minera de Chile (NYSE:SQM) has geography as a key advantage. A Chilean chemicals firm, its home market represents the second-largest producer of lithium. Further, U.S. relations with Chile is a net positive.
In fact, the State Department notes on its website that “Chile is one of the United States’ strongest partners in Latin America and a leader in promoting respect for the rule of law, economic stability, education, environmental protection, human rights, and sustainable development.” With the world seemingly going mad, it’s nice to have international partners you can depend on.
Better yet, SQM knows how to deliver the goods. Again, 2020 was a rough time for the company. However, it bounced back in 2021 with sales of $2.86 billion, up 47% from 2019’s result. Also, SQM is off to a flying start in 2022, with Q1 sales of $2 billion up nearly quadruple that of the year-ago quarter’s tally.
SQM encountered some softening over the past month, which makes it intriguing as one of the undervalued lithium stocks to buy on account of its financial robustness.
Undervalued Lithium Stocks: Pilbara Minerals (PILBF)
Based in Australia, Pilbara Minerals (OTCMKTS:PILBF) is a pure-play lithium company. According to the company’s website, Pilbara owns 100% of the world’s largest, independent hard-rock lithium operation. As with SQM above, Pilbara enjoys a geographic advantage.
First, Australia is one of the closest allies of the U.S. and western nations, an important partner in the eastern hemisphere. Second, Australia is a natural resource powerhouse, being the world’s largest producer of opal and the largest exporter of coal. Of course, it’s an important source of several other commodities, including lithium.
Now, it’s important to point out that PILBF is really what most folks would call a penny stock. As well, shares have dropped 32% in 2022. Nevertheless, against a basket of valuation metrics, PILBF is considered significantly undervalued.
Although nominal revenues have been muted, the company has really picked up steam in 2021. For the half-year period ended Dec. 31, 2021, Pilbara generated $208.7 million in revenue, up 369% against the year-ago comparison. Therefore, if you want to take a speculative shot with undervalued lithium stocks to buy, PILBF could be interesting.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.