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2 ASX shares I can’t ignore: PLS and COL

The Pilbara Minerals Ltd (ASX:PLS) share price is lower 1.1% since the start of the 2023. Meanwhile, the Coles Group Ltd (ASX:COL) share price is 19% away from its 52-week high.

PLS share price

Pilbara Minerals is a leading ASX-listed lithium company, owning 100% of the world’s largest, independent hard-rock lithium operation, Pilgangoora, which it acquired in 2014.

Pilbara’s primary business is to, put simply, find, dig up and sell spodumene concentrate. It sells its concentrate through “offtake” agreements and spot sales on the Battery Material Exchange (BMX) platform. A good example of an offtake partner is Great Wall (the Chinese car company) or POSCO, a South Korean company.

Pilbara has overcome significant hurdles to become a leader in lithium mining in Australia. However, as a commodities producer, its revenue is still at the mercy of (sometimes dramatic) fluctuations in the price of spodumene in the global market. Even still, bulls would say it’s a ‘pure play’ investment on demand for electric vehicles and battery tech.

While it may be large, Pilbara Minerals Ltd is a growth stock, and so it requires a different set of rules and may not be simple hard to value, at times. Studies have shown that over 5-10+ years, it’s top-line revenue growth which explains a stock’s performance. That’s why it’s good to see Pilbara Minerals Ltd is able to growth revenue at 185.3%, a good clip.

COL share price

Coles is an Australian retailer providing customers with everyday products including fresh food, groceries, general merchandise, liquor, fuel and financial services. It was founded in 1914 in Victoria, where its HQ still remain.

Coles was formerly owned by conglomerate Wesfarmers from 2007 until 2018, when it was spun-off and listed as a separate entity on the ASX under the ticker symbol ‘COL’. Coles’ earnings are dominated by the supermarkets side of the business, however, it partly or fully owns or operates adjacent businesses like flybuys, Liquorland, First Choice, Vintage Cellars, Coles Express and more.

Every week millions of Australians choose to shop for essential food and drink at Coles because of its prices, range and location. While it is the smaller brother of Woolworths, which has nearly 40% market share, Coles isn’t too far behind, with about 28%.

Share price valuation

As a growth company, the way to put a rough forecast on the PLS share price could be to compare its price-to-sales multiple over time. Currently, Pilbara Minerals Ltd shares have a price-sales ratio of 2.65x, which compares to its 5-year average of 6.53x, meaning its shares are trading below their historical average. Please keep in mind that context is important – and this is just one valuation technique. I wouldn’t make a decision based on one metric.

Since it is a more mature-style business, the COL share price is offering a historical dividend yield of around 4.35%, which compares to its 5-year average of 3.82%. The Rask websites, especially our Rask Education platform, offer free tutorials explaining Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). Both of these models would be a better way to value the COL share price.

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