In the race to find the best growth stocks out there, investors often start with the sectors of focus. Of course, artificial intelligence is all the rage these days. Cloud computing and cybersecurity are always good to look at. And then there’s the massive upside electric vehicle (EV) producers like Tesla (NASDAQ: TSLA) can provide.
However, for those looking to play the EV boom, there’s a better way to do it, in my view. Buying into the production of EVs involves putting one’s capital to work in a capital-intensive business at the whims of the economy. However, buying into the back-end suppliers supporting this fast-growing sector may be more lucrative.
Here’s a look at why I think Lithium Americas (TSX: LAC) is worth a look right now.
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What sets LAC apart in the market from other Lithium-based miners?
Did you know that Lithium Americas was the first company to produce lithium from clay?
Lithium Americas’s future plans are currently in the grey. However, if it had figured out lithium extraction from clay, then it would be just a matter of time before it soon announced some bigger updates.
Actually, the news is already there. Lithium Americas has announced its split into two separate lithium companies, and the shareholders have given their approval.
A meeting held in the last week of June has gathered votes in favour of the separation from the shareholders. The separation will result in LAC establishing and operating as a Lithium Americas (Argentina) Corp., while the new company will be named Lithium Americas Corp. (“Lithium Americas (NewCo)”).
Lithium Argentina will look after the operations in Argentina, which is currently developing the Caucharí-Olaroz project after its recent discovery of lithium. It will simultaneously look after the regional growth accompanied by the advancements in Pastos Grandes Basin.
Lithium America (NewCo.) will lead the North American lithium supply chain by focusing on advancements of the fully owned Thacker Pass project.
Why should you buy LAC today?
Lithium Americas has a market cap of approximately $3.9 billion. If you want to take into consideration its earnings per share (EPS) before investing, the company’s valuation essentially ignores the expectations of analysts covering the stock. Analysts expect Lithium Americals to pump out earnings per share of US$0.13 for 2023 and US$1.54 for 2024. This represents 119% & 1,085% growth, respectively, over these time frames.
Indeed, Lithium Americas’s current earnings are in the red, so this is a difficult stock to digest. And it should be noted that these forecasts are based on the EV boom continuing over the next couple of years. A recession could certainly dampen demand for EVs and, therefore, lithium over this time frame.
That said, it’s my view that LAC stock could be an intriguing buy on any big dips moving forward. As a long-term way to play the electrification of our world and the impressive advancements in lithium battery technology, this is among the best options.
