Hi guys, I have only been into stock investing the last 3-4 years as just getting to the age where i have saved an investible amount. And also put a chunk of my super into stocks of my choice. (to much partying and overseas travel when I was a young bloke..)
But is there a general rule of thumb for profits to market cap ratio? I know a huge amount comes down to expected future growth and market conditions of course, but from having a look at a few other companies on the ASX I think PLS has absolute bare minimum 4 bags in it over the next 3 years due to outstanding profits when we come online.
Some other stocks:
BHP – around 3.5 billion profit (only 2.5bil profit this year though) MC = 100 billion (MC =28x profits)
A2M Around 160 million profit (although going through rapid growth) MC = 6.3 billion (MC = 39x profits)
Bendigo bank around 415 million profit, MC = 5.4 billion (MC = 13x profits)
As you can see some big differences, Bank is very steady, A2M must be pricing in growth big time, and BHP profits could and probably will be much higher if resources continue to rise in price.
All that aside lets say PLS should take an average of MC = 25x profits as it's in a growth industry (still know where near A2M's lofty 39x) and be conservative with profits:
Just profits after tax are $500 US a ton. (they will be more plus tantalum, but lets be conservative and use this figure, extra money can pay for taxes)
This give PLS a 400 mil US profit per annum once stage 2 is in place and 800ktpa production.
At current exchange rates and 25x profits to MC this would equal 12.6 billion MC… Almost a Disallowed from here…
Lets be ultra conservative and say we only make $250 US a ton, (if lithium prices go down %60 from current rates) would still be a 4 bagger from here using those calculations.. But in reality i think we would get sloser to $650 US a ton..
Sorry for the big read..
Thoughts?
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