Pilbara Minerals Ltd (ASX: PLS) shares have been very strong performers in 2021.
Much to the delight of its shareholders, the lithium miner's shares are up a whopping 171%.
But that's only telling part of the story. Investors that picked up shares five years ago have done even better.
What would have happened if you'd bought $1,000 of Pilbara Minerals shares 5 years ago?
Any investors that bought Pilbara Minerals shares five years ago would have smashed the market return.
During this time, the company's shares have averaged a total return of 39% per annum.
This would have turned a $1,000 investment into ~$5,200 today. That's more than four times your original investment.
Why are its shares smashing the market?
Investors have been bidding Pilbara Minerals shares higher in recent years on the belief that it stands to benefit greatly from rising lithium prices.
For example, during the fourth quarter of FY 2021, the company didn't reveal the price it was commanding, but mentioned that spodumene concentrate prices were being reported in the range of US$700 and US$975/dmt.
This compares very favourably to the unit cash operating cost of US$441/dmt (CIF China) that was achieved for the quarter.
Another positive was the outperformance of its shipments. Pilbara Minerals revealed that it shipped 95,972 dmt of spodumene concentrate for the quarter. This was ahead of its guidance range of 75,000 to 90,000 dmt.
What's next?
The good news for the company, and Pilbara Minerals shares, is that JP Morgan is forecasting strong long term prices as demand increases. This is being driven by the electrification revolution, with households turning to electric vehicles (EV) and battery power storage.
This week it upgraded its long term-lithium spodumene price forecast by 31% to US$850 a tonne. If this proves accurate, it leaves Pilbara Minerals well-placed to grow its profits as production ramps up across its operations.
Whether this leads to another five years of outperformance, time will tell. But the future certainly does look bright.
