Good News & Bad News, page-8827

yeah, look, valuing on PE without understanding where the company sits in the development cycle is useless.

It’s a robust measure for mature businesses but not for high growth - and that’s exactly where PLS will be in the next 5 years at it ramps up supply. Perhaps if you’re dedicated to using P/Es you could have weighted the PE of similar competitors (ie SQM, ALB, GXY, ORE etc) to establish what PE PLS might achieve in future...rather than randomly plugging in 25.

Look at A2M and CHN and APT. All vastly different sectors but growing hard and therefore PE feels high.... earnings are low but the market recognises traction and the impending demand for their product. PE has gone out the window as a useful tool for valuation - look at Tesla... how can you honestly value the business on the next 50+ years when you can’t foresee if a war or pandemic would radically undermine their earnings model.


id suggest reading up on a DCF model - it’s also what analysts use. You could then weight the two. And say 80% of the valuation is derived from perceived future cash flows on your assumptions (tonnage, price, costs, exchange headwinds etc) and the other 20% on a PE valuation method.

I commend your work and sharing your thoughts with the community to discuss. I’m merely sharing my own insights into why the valuation you arrive at does not represent fair value in my mind.