Sociedad Quimica y Minera de Chile (SQM) reported SQM solid earnings Thursday and shares are lower. The company grew 871% in Q3, but fell short of Wall Street’s profit estimate. Despite this, the company beat on revenue.
SQM’s lithium operations continue to benefit from strong demand for the key ingredient in lithium-ion batteries used by electric vehicles. Lithium prices continue to rise and SQM’s sales volume and average price have grown rapidly in the past few quarters.
As the market for electric vehicles expands, there will be more demand for lithium. This will create higher prices for lithium and increase demand for SQM’s lithium carbonate, which is a critical component of batteries for these cars.
The supply/demand balance is tight and the global lithium market is expected to be in good health for the next few years. As a result, SQM expects lithium prices to continue to rise for the foreseeable future.
This is great news for shareholders of SQM, as it will help to support its financial position and growth prospects. Moreover, this will allow shareholders to realize a higher return on their investment.
Valuation: SQM is currently graded B on its valuation metric, which helps investors determine whether the stock is trading at a discount to its peers. This is important because a stock that’s overvalued or undervalued will have a different impact on your investment results than one that is rightly valued.
Momentum: The company has a positive momentum score, meaning that it recently experienced an increase in its share price and recent earnings estimate revisions are positive. This may encourage investors to buy SQM, especially if they are looking for a stock with a quick turnaround in its price.
Earnings: The company surpassed consensus EPS estimates in four of the last five quarters, and analysts are expecting more growth from SQM in 2022. Analysts also believe that SQM will continue to be a top lithium producer in the coming years, and this could lead to higher prices for the company’s products.
Financials: SQM’s debt-to-EBITDA ratio has been declining steadily over the past few years, and it will continue to decline as the company continues to invest in new facilities. Its asset-to-equity ratio has remained above 2.00 for the same period, which suggests that the company has sufficient funds to cover its liabilities.
The company has been a Zacks Rank 3 stock for several months, and this indicates that investors have the potential to generate inline returns relative to the market. Investors should consider buying SQM as a long-term investment.