Unlike gold and silver, lithium isn't commonly held by investors as a tangible commodity. Thankfully, there are a number of lithium mining stocks to choose from, several of which have decent trading volumes and represent respectable lithium producers with operations in the Americas.
Among the top names in this category is Livent (LTHM +0.00%), which has significant operations in Argentina and Canada but is also expanding into North Carolina and China. Given the strong demand for lithium as a component of electric vehicle (EV) batteries, one might assume that Livent stock should have zoomed higher during the past year. Yet, assumptions are often wrong on Wall Street, and there may still be an opportunity to capitalize on Livent's growth before the stock potentially takes off.
Lithium flies and dives while Livent stock stays grounded
Let's compare the spot lithium price to the price of a lithium mining stock like Livent stock. This will provide an example of how commodities and miners don't necessarily move in lockstep but can be correlated for brief periods of time. A year ago, lithium traded at around $60 per kilogram; it flew up to $85 in late 2022 before crashing below $50 recently.
NYSE: LTHM
Key Data Points
Meanwhile, Livent stock made a nearly perfect round trip from $21 to $35 and back again during the past 12 months. Hence, a $1,000 stake in Livent stock would have gained 67% and been worth $1,667 for a hot minute before coughing up those gains and disappointing eager investors (these are the whims of the market, after all).
Still, if you're bullish on lithium, then it can still make sense to consider a position in Livent stock. The company's revenue growth has been exceptional, and Livent's bottom-line stats are astounding. In fiscal year 2022, compared to FY 2021, Livent increased its revenue by 93%, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 428%, and its adjusted earnings per share (EPS) by 678%. Livent's fourth-quarter FY 2022 year-over-year improvement was just as impressive, with revenue up by 79%, adjusted EBITDA up by 291%, and adjusted EPS up by 400%.
Granted, that's a snapshot of a year in which lithium soared, and the lithium price has sharply corrected since then. Still, investors can be encouraged by Livent's FY 2023 guidance -- which involves revenue rising around 30% and adjusted EBITDA increasing roughly 50% versus 2022's midpoint -- while also keeping an eye on the ups and downs of the lithium price.
Livent remains active and earnings-positive
Only time will tell whether the lithium price can stage a comeback in 2023 and possibly take Livent stock up with it. Still, at least you'd be invested in an ambitious and income-positive miner if you pick Livent stock. In its Argentina-focused operations, Livent expects its "nameplate lithium carbonate capacity to be double that of 2022, approaching 40,000 metric tons" by the end of 2023. Furthermore, including its operations in China, Livent plans to increase its "total global lithium hydroxide capacity to 45,000 metric tons."
Sure, there are similar U.S.-headquartered lithium-focused miners with ambitious goals of their own; two examples are Lithium Americas (LAC +0.00%) and Piedmont Lithium (PLL +0.00%). However, neither of those miners is earnings-positive, nor do their current-quarter EPS forecasts call for positive net income. Consequently, there are no price-to-earnings ratios to speak of, making it more challenging to assign reasonable valuations to those companies.
In contrast, Livent is earnings-positive and is expected to remain so during the current quarter, and it has a decent track record of quarterly EPS beats. Granted, the same could be said about Sociedad Química y Minera de Chile (SQM 0.06%) and Albemarle (ALB +0.75%), so Livent isn't the only reasonable option here. Adventurous traders could even build their own mini-portfolio of income-positive lithium names -- but the point is, Livent should at least get an allocation somewhere in that portfolio.
So, don't judge Livent negatively just because a $1,000 investment in the company didn't make a big move over the past 12 months. Livent still seems to check all the right financial boxes, is preparing for an active year of mining operations, and could reward its shareholders handsomely if the lithium price moves higher and stays there.
