While investors love their electric vehicle brands, a better option for the future of transportation may be to consider the best lithium stocks to buy. No, they’re not nearly as exciting as betting on the next possible Tesla (NASDAQ:TSLA). And to be quite honest, their upside potential may be limited.
Nevertheless, every EV manufacturer requires lithium – and plenty of it. Therefore, this segment is akin to selling tickets to the big game. You might not know which team will emerge victorious but you do know the matchup will generate tremendous popularity. With that in mind, below are the best lithium stocks to buy.
Headquartered in Philadelphia, Pennsylvania, Livent (NYSE:LTHM) bills itself as a world leader in lithium technology. Unfortunately, a frustrating knock about Livent is that it insists on word salad to describe its enterprise, confusing would-be investors. That said, Livent serves multiple industries, including energy storage and battery systems, polymers and the production of greases.
On the financials, Livent offers several attractive attributes. First, it benefits from a stable balance sheet, particularly an equity-to-asset ratio of 0.7 times. In contrast, the sector median value sits at 0.58 times. Operationally, Livent commands a three-year revenue growth rate of 15%, outpacing 73.13% of its peers. Also, its EBITDA growth rate during the same period is nearly 50%.
Notably, the market prices LTHM at a forward multiple of 10.42. As a discount to earnings, Livent ranks better than 72.15% of companies in the chemicals industry, making it an attractive candidate for best lithium stocks to buy. Finally, Wall Street analysts peg LTHM as a consensus hold. However, their average price target stands at $26.63, implying over 31% upside potential.
Sociedad Quimica (SQM)
One of the most popular ideas for best lithium stocks, Sociedad Quimica (NYSE:SQM) is a Chilean chemical company. Primarily, the enterprise gains fame as the world’s biggest producer of lithium, according to its corporate profile. With several countries racing to electrify their transportation networks, securing the key commodity will take great precedence. Thus, SQM should stay relevant for years, if not decades.
Another factor bolstering SQM centers on its positive financial profile. For starters, the company’s balance sheet presents a stable framework. As an example, its Altman Z-Score is 5.67, indicating low bankruptcy risk in the next two years. Operationally, SQM’s three-year revenue growth rate pings at 81.3%, blowing past 98.64% of the competition.
Also, the market prices SQM at a forward multiple of 4.86. As a discount to earnings, the enterprise ranks better than 97.47% of sector peers. Lastly, covering analysts peg SQM as a consensus moderate buy. Their average price target stands at $104, implying nearly 41% upside potential.
Li-Cycle Holdings (LICY)
An innovative enterprise, Li-Cycle Holdings (NYSE:LICY) is an industry leader in lithium-ion battery resource recovery and the leading lithium-ion battery recycler in North America, according to its website. Fundamentally, it seeks to make such batteries circular and sustainable. Again, with growing demand for lithium, Li-Cycle may help address global shortage concerns. Not surprisingly, then, LICY gained over 14% of equity value since the start of the year.
In fairness, the longer-term framework presents a more challenging profile. Since making its public market debut, LICY gave up more than 44% in the charts. Some of the volatility focuses on Li-Cycle’s financial metrics, which will test prospective investors’ patience. For example, its EBITDA and free cash flow (FCF) growth rates sit deeply in negative territory.
As well, profit margins sank in the abyss, rendering LICY as one of the high-risk, high-reward names among the best lithium stocks. However, keep in mind that analysts peg LICY as a consensus moderate buy. Moreover, their price target stands at $8.14, implying nearly 51% upside potential.
An American specialty chemicals firm, Albemarle (NYSE:ALB) gains fame as being the largest provider of lithium for EV batteries in the world. Fundamentally, the more companies from jurisdictionally friendly nations focus on the critical commodity, the better. Otherwise, adversarial interests could stymie the U.S. and western allies. However, so far, investors don’t see it that way, sending ALB down more than 8% this year.
Over time, though, more market participants should see the light. On a financial note, Albemarle cuts an attractive figure. First, it features an Altman Z-Score of 3.75, indicating low bankruptcy risk. Second, the company benefits from a three-year revenue growth rate of 22.6%, outpacing 85.85% of the field. Further, its book growth rate during the same period pings at 22.5%.
Enticingly, the market prices ALB at a forward multiple of 6.89. As a discount to projected earnings, Albemarle ranks better than 89.24% of sector peers. In closing, analysts peg ALB as a consensus moderate buy. Their average price target stands at $304.50, implying nearly 55% upside potential, making it a worthwhile idea among the best lithium stocks.
Piedmont Lithium (PLL)
An Australian mining firm, Piedmont Lithium (NASDAQ:PLL) bills itself as a world-class developer of an integrated lithium business in the U.S. Here, the company focuses on the Tin Spodumene Belt of North Carolina. Powerfully intriguing, market participants bid up PLL to a return of more than 21% on a year-to-date basis. However, in the past 365 days, PLL slipped nearly 25%.
Nevertheless, for speculators, Piedmont may represent one of the best lithium stocks to buy. For starters, the company enjoys decent stability in the balance sheet. For example, its equity-to-asset ratio hits 0.94 times. In contrast, the sector median value is 0.83 times.
Furthermore, Piedmont’s three-year EBITDA growth rate pings at 30.1%, outpacing 73.74% of sector peers. However, investors should realize that Piedmont represents a pre-revenue enterprise. Therefore, much patience is required. Still, that’s not stopping BTIG analysts Gregory Lewis, who pegs PLL as a buy. Also, the expert’s price target stands at $85, implying over 63% upside potential.
Lithium Americas (LAC)
Headquartered in Vancouver, British Columbia, Canadian miner Lithium Americas (NYSE:LAC) garners relevance for its jurisdictional profile. As I stated earlier, competition for the underlying resource will only grow. Therefore, Lithium Americas and its ilk will likely gain significant prominence. So far this year, LAC swung up nearly 9%.
Still, it’s a volatile proposition. In the past 365 days, LAC gave up almost 42% of equity value. Much of the concerns center on the financials. Basically, Gurufocus points out that the company generated $4 million in revenue in 2017. Since then, it produced nothing on the top line as losses mounted. Therefore, LAC carries an aspirational profile.
In fairness, Lithium Americas does offer some attractive metrics, like a three-year book growth rate of 49.9%. Overall, though, it’s a challenging idea. So, why mention it as one of the best lithium stocks? Apparently, analysts love it, pegging LAC as a unanimous strong buy. Moreover, their average price target stands at $34.85, implying 80% upside potential.
Standard Lithium (SLI)
Another Vancouver-based enterprise, Standard Lithium (NYSEAMERICAN:SLI) claims to leverage the largest brine processing facilities in North America to lead a new wave of U.S. lithium production. Per its website, Standard Lithium features two flagship projects: the Lanxess Project and the South West Arkansas Project. Since the beginning of the year, SLI gained nearly 20% of equity value.
For full disclosure, in the past one-year period, SLI lost 58%. Therefore, it’s another example of a higher-risk, higher-reward entity among the best lithium stocks. Financially, Standard Lithium offers a slightly better fiscal profile than its speculative peers. For instance, the company’s equity-to-asset ratio stands at 0.97 times, ranking better than 87% of the metals and mining industry.
Still, it will require patience. Without generating revenue, the company cuts a very risky profile. Despite obvious concerns, Roth MKM analyst Joseph Reagor pegs SLI as a buy. The expert’s price target is $9, representing upside potential of nearly 165%.
On the date of publication, Josh Enomoto did not have (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 InvestorPlace.com Publishing Guidelines.