You are probably aware that Lithium Americas Corp. (NYSE: LAC) is a leader in the Other Industrial Metals & Mining space. In this analysis, we are going to look at some of the key financial ratios for Lithium Americas Corp. to determine a price prediction for LAC. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I'll share my LAC stock price prediction, then show you the approach and assumptions used to calculate the LAC stock forecast.
Before we go any further, let me start by saying this, stock forecasting is hard. I don't know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable LAC stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.
The Lithium Americas Corp. stock price prediction of $50 was derived from 3 main sources of data. I'll dive into the approach to show you how I determined how I “predicted” a stock price of $50 for LAC
The Financial growth Metrics provide an analytics valuation approach to determining a reasonable LAC stock forecast. The other two sources of data will be used to adjust the stock price prediction for LAC. Let's be honest, if you've ever done a valuation exercise on a stock or tried to determine the future price, it is both an art and a science.
For this part of the analysis, I am looking at the history of key financial metrics for Lithium Americas Corp. to forecast the stock into 2022 and 2025. Most investors know that historical performance does guarantee future performance, but it is useful to see how LAC has been trending.
LAC has experienced a 3 Year Earnings Growth Per Share of 71.11%. Let's assume that LAC can continue to grow Revenue and Earnings at a similar rate for the next three years, then we can assume the LAC stock forecast for 2025 will follow a similar growth trajectory. I recognize there are a lot of other factors but this is a straightforward and solid approach.
With LAC Earnings Per Share of -0.47 projected out at the 3 year growth rate gives us a future EPS of -0.8. If the current LAC Price to Earnings Ratio is -57.08 (and we assume this remains the same) then we determine the LAC stock forecast by multiple the P/E by the EPS to give us a stock price prediction of $45 per share
There are other ways to predict the price for LAC but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast LAC's stock price.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine a LAC stock forecast. It can also help you determine if you should buy or sell LAC There are a total of 14 analyst ratings for LAC. Here is the current breakdown of analyst ratings:
This breakdown of ratings indicates that Wall Street analysts are overall Bullish on Lithium Americas Corp. I factored this into the LAC stock price forecast by using it as direction guidance for the future. If you were to make investment decisions based on just analyst ratings, this would indicate LAC is a buy.
LAC's current P/E Ratio is -57.08 and has an ROE of -0.12 These ratios in isolation provide some insights, but it is better to understand them in content for both LAC and the sector. Utradea provides a PE, ROE, and DCF rating for stocks ranked between 1 (very poor) and 5 (very strong). Without having to go through the calculations, this provides me with a reasonable view of if these key metrics for Lithium Americas Corp. are good or bad from an investment perspective. Here is a breakdown of the ratings
Based on the actual PE and ROE, along with the metric ratings, I would say that the LAC forecast is reasonable.
Should you buy LAC? Well, based on the LAC stock forecast of 45 per share, the underlying analysis, and the current price of LAC, I would agree with the analysts and say LAC is a buy. Let me know what you think, happy to dive into other aspects of LAC to help you make an informed investment decision.