Sometimes we can make the mistake of avoiding an investment purely because it has gone up. The Pilbara Minerals Ltd (ASX: PLS) share price has made a tantalising gain of 30% in a month, even with today's 7% dive. So, could passing up on Pilbara Minerals shares be a costly decision?
We take a look at what some experts in the industry think of this ASX-listed lithium titan following its remarkable performance. Could there still be money left on the table, or could it be overblown hype on the future of lithium?
Could Pilbara Minerals shares still light up a portfolio?
Peering back at the end of 2020, Pilbara Minerals was beginning to tap into a resurgence in lithium expectation. The company's shares had tripled in value that year, despite recording a loss of $57 million on $105 million in revenue.
Fast forward to today, and Pilbara Minerals' fundamentals have grown into the prior speculation. At the end of June 2022, the $14.5 billion company posted an astounding $561.8 million profit on $1.19 billion in revenue. That's right, a 47% profit margin… incredible!
However, the future success of Pilbara Minerals and its shares is likely to be highly contingent on where the lithium price heads next. Fortunately, the team over at Wilsons believes there are even brighter days still to come for the critical battery material.
As previously penned by my colleague, Tony Yoo, Wilsons is noticing a potential dislocation between expectations and future reality for available lithium supply. As such, the team at Wilsons said:
We believe there could be significant upside to the forecast long-term price if there is a supply-demand imbalance and the current price profile looks too pessimistic.
Wilsons also pointed to Pilbara Minerals as one ASX lithium share they like in the space.
In addition, private client advisor Jean-Claude Perrottet of Medallion Financial Group labelled Pilbara Minerals shares a hold in a recent article on The Bull. According to Perrottet, "The outlook is bright if prices remain elevated".
What about valuation?
Right now, investors in Pilbara Minerals shares are getting a lithium producer at around 26 times price-to-earnings (P/E). For comparison, its peer average earnings multiple sits around 19 times.
However, the company is currently saddled with cash. As at 30 June 2022, Pilbara tallied up $591.7 million in cash and equivalents, with only $234.7 million in debt. This gives it a net cash position of approximately $357 million.
The Pilbara Minerals share price has far exceeded the returns of the S&P/ASX 200 Index (ASX: XJO) over the last year. The high-flyer has run up a 108% positive return for its shareholders, while the benchmark has fallen 12%.