Novonix Ltd (ASX: NVX) shares have delivered the highest returns out of all the S&P/ASX 200 Index (ASX: XJO) companies in the past year. During this time, the battery materials company has experienced an 8-fold increase in its share price.
Now standing at a market capitalisation of over $4 billion, investors on the sidelines are trying to establish whether this high-flyer will deliver the operations to support its lofty valuation. For context, the company recorded $5.23 million in revenue for the year ending 30 June 2021. This equates to a price-to-sales (P/S) ratio of approximately 766.
Strong demand for electric vehicles is widely anticipated. However, Novonix will still need to prove it can carve out its place in the industry.
Plans for the year ahead
In the near term, ASX-listed Novonix will be focusing on advancing discussions with battery cell manufacturers. At the same time, the company plans to increase its annual anode production. Ultimately the first target is to reach 10,000 tonnes per year production by 2023.
Novonix's purchase of a manufacturing facility in Chattanooga, Tennessee is an important pillar in the company's first phase target. This facility will be producing high purity and high consistency anode material for long-life batteries.
Additionally, the company will continue to develop its patent-pending cathode technology. The technology is based on a dry particle micro granulation technique. In 2022, Novonix will continue its research and development of this method in its Halifax facility.
An expert's take ASX-listed Novonix
Despite the team at Firetrail Investments being bullish on electric vehicles (EVs), they are more cautious when it comes to the Novonix share price on the ASX.
In a self-published article on Livewire, Matthew Fist of Firetrail provided a detailed look into the battery materials company. Importantly, Fist separated the currently revenue-generating business segment (battery testing and equipment) from Novonix's other divisions.
From here, the portfolio manager estimated this moneymaking segment could be worth $100 million. However, with a $4 billion market cap, Fist pondered where the remaining value is to be found.
Soon enough, Fist outlined the anode materials business as the all-important portion of Novonix — writing, "This is the part of the business that the market is excited about."
After some quick maths, Fist estimated that if the company were successful with its ambitions, it would produce $130 million of earnings before, interest, tax, depreciation, and amortisation (EBITDA) in FY2025. In turn, this 2025 forecast puts ASX-listed Novonix at an EV/EBITDA multiple of 43 times. For comparison, the battery materials average is between 10 to 15 times.
