The world is changing in more ways than one. Significant shifts like moving away from fossil to renewables are impacting multiple facets of our society, from personal preferences to the global economy. But even though we have taken several significant strides towards decarbonizing, there are still several practical/engineering hurdles. One of them is energy storage.
For now, we rely heavily on lithium Ion batteries for everything from electric vehicles (EVs) to solar farms where the electricity is stored. This made lithium and other metals used in the battery highly coveted. Lithium prices rose rapidly, and so did the stock of many lithium companies, including Standard Lithium (TSXV: SLI).
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The company and the lithium economy
Standard Lithium is headquartered in Vancouver but operates exclusively in the United States. It has two projects: one in California and one in Arkansas and Texas. The company is developing its flagship project for Direct Lithium Extraction (DLE) and has a strong focus on sustainability. It is at least a year away from actual production (set for 2026), but the current feasibility studies are quite promising.
It’s expected to produce both lithium hydroxide monohydrate (LHM) and lithium carbonate, which may have different applications. The first is preferred for high-power density applications like EVs, while the other might offer more affordable power storage solutions as they are cheaper to refine.
When the EV boom started, many companies started securing contracts for lithium. This encouraged investors to start investing heavily in lithium companies, hitching an early ride to their financial profitability. Many companies, including Standard Lithium, experienced powerful growth. This particular stock grew over 1,600% in less than two years.
Stock’s prospects
The stock is heavily discounted, trading below 83% of its five-year peak. But it did start showing signs of a recovery. In 2024, it experienced one minor and one significant growth surge, over 120%, in less than two months.
It’s also heavily undervalued, trading at a price-to-earnings ratio of just three. The company has minimal debt and over $39 million in cash, so the company will likely be able to sustain its operations without incurring debt in the future.
Lithium prices might make a comeback. The growth might not be too substantial, but in the heavily discounted state of the stock, even a modest upward trend can cause the stock to shoot up, as it did in 2024.
With a significant enough investment, solid gains offered by the stock (ideally similar to its early days’ bullish trends) can help you enjoy massive gains. It may even be enough to push your portfolio into the million-dollar territory.
Foolish takeaway
Another aspect of Standard Lithium is environmental, social, and governance investing. If you want to invest in green, sustainable stocks, Standard Lithium can be a promising pick for two reasons. One is the nature of its business, as it literally facilitates sustainability. Second, by pursuing sustainable production techniques, Standard Lithium can also reduce the secondary emissions associated with lithium production.
