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

The Washington H Sl Pttnsn nd Cmpny Ltd (ASX:SOL) share price has increased 22.8% since the start of the 2024. Meanwhile, the Pilbara Minerals Ltd (ASX:PLS) share price is 35% away from its 52-week high.

SOL share price

Founded in 1903, Washington H. Soul Pattinson (WHSP) is an investment company with a diversified portfolio of assets across a range of industries and asset classes.

Some of SOL’s largest holdings include stakes in other well-known publicly listed companies such as TPG Telecom (ASX: TPG), New Hope Group (ASX: NHC) and a cross shareholding in Brickworks (ASX: BKW).

SOL’s mission is to deliver superior returns to its shareholders by creating capital growth and steadily increasing dividends as a holding company. It’s the second-oldest publicly listed company on the ASX and has a strong track record of capital growth and dividends. It should be thought of as family-run LIC, for the benefit of all shareholders (who are deeply aligned).

Since we consider Washington H Sl Pttnsn nd Cmpny Ltd to be a blue chip stock, or a mature business, we like to look at things like return on invested capital (ROIC) and revenue growth as signs of sustainability. In FY23, Washington H Sl Pttnsn nd Cmpny Ltd had an ROIC of 8.20% and revenue has compounded at -4.4% in recent years. If a mature business struggles to consistently hit 10% ROIC it could be a sign the business may not be investing its capital effectively. This is just a rule of thumb or ‘general’ we follow.))

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.

Share price valuation

One way to have a ‘fast read’ of where the SOL share price is, is to study something like dividend yield thru time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can be influenced by yearly or bi-yearly fluctuations. Currently, Washington H Sl Pttnsn nd Cmpny Ltd shares have a dividend yield of around 2.82%, which compares to its 5-year average of 2.54%. Put simply, SOL shares are trading below their historical average dividend yield.

The PLS share price trades at a price-sales ratio of 2.61x, which compares to its 5-year long-term average of 6.53x. So, PLS shares are trading below their historical average. However, please do more investigating than a simple multiple like this. Our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like Pilbara Minerals Ltd.

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