On the topic of Pillbara vs. Allkem and their share price performance :
For me, a couple of Warren Buffet's principles apply, which I do not always adhere to, but they are always a factor in the valuation of a company. One of the criteria is the price-book ratio. If I look at the two stocks from this point of view, I can't help but say that Pillbara is already very, very sportily valued with a price-book ratio of 11 compared to Allkem with a price-book ratio of 2.1.
One should be aware that from a price-book ratio of 2, one technically speaks of an overvaluation of the company.
Another factor or ratio for me is EBITDA, which I look at. EBITDA shows whether a company is growing or stagnating. Allkem's EBITDA has increased by over 200% from 2020 to 2021, and according to the numbers reported so far this year, by about another 500%.
The third factor I look at is the number of shares, as this number has an impact on a possible dividend and EPS. Here it does not look very good for Pillbara, because with almost 5 times the number of shares on the market ( about 3 billion ) to the good 670 million of Allkem, results in EPS and a possible dividend will show much better for Allkem.
If I then look at the long-term assets of the two companies, Allkem is also listed here with almost twice the value.
But what do I get with the purchase of a share?
That is what the book value provides information about. With one share of Allkem, I receive a book value share in the company worth 2.58 dollars - whereas with Pillbara it is only 0.20 dollars. This is only the value in dispute, should a company go bankrupt and be wound up, but for me it is always a criterion that determines my willingness to buy a share at X times what it is actually worth.
AKE Price at posting:
$12.40 Sentiment: Buy Disclosure: Held
