Saturday, December 9, 2023
Stocks To Buy

The 3 Most Undervalued Lithium Stocks to Buy in September 2023

The lithium market has undoubtedly been booming in recent years, and it does not seem to be losing strength; on the contrary, the more time passes, the more momentum it is gaining, since the more technology advances, the more important lithium becomes as a raw material. This mineral is extremely important for the production of batteries, which are used in electric cars and other devices that we use today. If you are interested in investing in companies that participate in the lithium market, here are 3 undervalued lithium stocks that may catch your attention.

Standard Lithium (SLI)

Standard Lithium (NYSE:SLI) is first on the list of undervalued lithium stocks to consider adding to your portfolio. It’s making strategic moves into the lithium mining market, and its efforts are attracting investor attention. The company has recently expanded its operations from Arkansas to Texas, securing rights to valuable wells in East Texas. This expansion gives them access to high-quality lithium-rich brine resources in a promising region.

A turning point for them was the discovery of the highest quality lithium brine in North America, with a concentration of 634 mg/L. This discovery is significant because the high quality brine is the richest in lithium. Additionally, the high quality brine can significantly reduce investment and operating costs, thereby increasing profitability.

Furthermore, they have initiated a drilling program at their southwest Arkansas lithium project aimed at gathering vital data for feasibility studies, a crucial step for any large-scale project.

Another strength is its promising financial health. As of March 31, 2023, the company had an impressive $91.4 million in cash with a working capital surplus of $88.7 million, providing a solid financial foundation for future growth and project development.

They have also released promising results from a feasibility study for their first commercial lithium extraction plant, which will begin production in 2026. With a net present value (NPV) of $550 million and an internal rate of return (IRR) of 24%, this project has excellent financial prospects. In addition, they are actively exploring new opportunities, including the discovery of high-grade brine in Arkansas.

EnerSys (ENS)

EnerSys (NYSE:ENS) specializes in energy storage solutions for industrial applications worldwide. Essentially, they supply batteries and energy storage systems to various industries.

During the first quarter of fiscal year 2024, the company experienced a 1% increase in net sales to $909 million. This growth can be attributed, in part, to customers replenishing their inventory levels.

What is really noteworthy is its record gross margin of 26.4%, which means an increase in profitability on every product sold. Advantageous tax benefits achieved through specific legislation have helped pave a path toward success.

Operating performance is another area in which the company shines. They generated $89 million in operations, a remarkable 78% increase, and an all-time high of $107.2 million in adjusted operating profit, indicating exceptional business management.

In addition, they are reducing their debt relative to their earnings, indicating prudent financial management. They have also announced a 29% increase in dividends to shareholders, demonstrating confidence in the company’s future.

Looking ahead, EnerSys is poised for expansion by partnering with European company Verkor to establish a large battery factory in the United States. This move not only boosts growth, but also promises improved products.

Sociedad Química y Minera de Chile (SQM)

Sociedad Química y Minera de Chile (NYSE:SQM) is a Chilean company whose focus is mining and chemical production, and in particular, lithium. Here’s why they are an interesting investment prospect and made this list of undervalued lithium stocks to buy now:

First, they have demonstrated solid growth in lithium production, tripling their capacity in recent years. This positions the company as a major player in the global battery and renewable energy market. Its strategic alliances with automotive giants such as Ford (NYSE:F) and LG Energy Solution further underline the sustained demand for its products.

From a financial point of view, despite a drop in profits and revenues during the first half of 2023, they remain a stable force in the lithium market. In particular, they have contributed approximately $1.7 billion to the Chilean treasury during this period, illustrating their economic importance.

They have also earned an exceptional IRMA 75 score for their lithium mining operation in the Salar de Atacama, a testament to their commitment to responsible and transparent business practices. In a world increasingly focused on sustainability and renewable energy, this commitment is critical.

As of this writing, Gabriel Osorio-Mazzilli did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Gabriel Osorio is a former Goldman Sachs and Citigroup employee. He possesses discipline in bottom-up value investing and volatility-based long/short equities trading.

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