I'm sure
@szopen doesn't mind me reposting the reddit post he posted
elsewhere. Here it is:
n a slightly more serious note most lithium projects at this stage on the asx IMO are valued at 3+ years in advance with no risk priced in or upside. Like CXO is 950mil MC with an expected 50mil NPAT (based on a Jyswft post).
LKE (and all aspiring lithium producers in 1-5 years) have years of blown out approval processes, process plant setbacks, cap raises, ineffecient startups and the underlying commodity price to contend with let alone whether it is even approved or economical. There are hundreds of books and guides which state buying projects at these prices is paying too much.
You are paying a premium in the short term to be exposed for years of risks in the long term which is contrary to the entire mining industry. In some cases paying 250%+ of the NPV or paying a potential 20-30 percent premium for each dollar of anticipated earnings.
To directly answer your question on what value do people get. The answer is there isen't. Investors are buying into companies which in some cases have little to no hope of reaching production let alone providing tangible value via a dividend. So people buying these stocks are ATHs are only hoping they can sell their shares to someone else for more than they did. And the cycle repeats.
And there is a legitimate term for this called "the greater fool theory"
To quote wikiepdia "the greater fool theory states that the price of an asset is determined by whether you can sell it for a higher price, at a later point in time. Any person buying the asset might be a fool, but a person buying the overpriced asset later on, for a higher price, is deemed the greater fool"
"...during a market bubble, one can make money by buying overvalued assets and selling them for a profit later, because it will always be possible to find someone who is willing to pay a higher price"
I would say most people on here or buying Lithium companies right now are just participating in the greater fool theory banking on someone elses fomo. I don't think you can justify the fundamentals on a lot of these right now. Even if they are making big profits years down the line why pay the 8+ year fair value today.
jswyft made a post that PLS in 2024 could produce 1billion in NPAT at a P/E of 10 which is decent for the mining industry (p/e is typically lower, because you are getting a lot of commoditiy risk *cough iron ore cough) and that puts it at 10billion MC. Its currently 7billion. Its got to increase its revenue by litearlly hundreds and hundreds of millions in two years to gain less than 50% market cap.
Summarises nicely the discussions we've had on this page and explains why our SP is where it is atm, but also, IMO, tells you, where it will be! As I've said before, sadly, the market values guys selling the dream and screaming it from the roof tops more than the fair dinkum Aussie battler who believes and demonstrates that a business value must ultimately relate to the profit you make, and just gets on with building a viable profitable business and then self funds expansion.
In AGY's case, the excitement was in 2017. Now it's no longer selling the dream (hence less lofty valuation) but the real McCoy (hence valuation based on expected profit, and thus less exuberant but almost baked in).
IMO, based on many great posts and analysis freely shared here, and my own calculations, we are on a low risk path to well north of 65c within 12 months.
PS: We are all so spoilt, nobody gets excited any more about +100% in 12 months! People - pinch yourselves! This is an unreal return - especially when you consider the risk and that it could be a whole lot more, and then even more in 1,2, 5 years time.
$5 for AGY in 2026 is not out of the question! How would you feel then about your impatience and frustration in 2022 when you thought about selling (some) at 32c!
(20min delay)
