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What are we looking for?

With gas firmly above $2 a litre for most of us and the move to electric vehicles in second gear, what Canadian-listed companies are involved in the space, and what valuations do we have for them?

The screen

We used StockCalc’s screener to select 10 TSX- and TSX Venture Exchange-listed stocks with descriptions that indicate they are in the EV space. We purposefully focused on small capitalization and microcap stocks, given this is an emerging sector. We then used StockCalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each to see whether it is undervalued or overvalued compared with its current price.

Overview of the techniques used:

  • Discounted cash flow (DCF value) is a valuation technique in which cash-flow projections are discounted back to the present to calculate value per share;
  • A price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
  • An adjusted book value (ABV) is calculated by multiplying book value per share by its 10-year average price-to-book ratio.
  • If we have analyst coverage, we look at the consensus target price.

More about StockCalc

StockCalc is a fundamental valuation platform with tools to calculate and report on value per share for thousands of public companies listed on major North American stock exchanges. StockCalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to StockCalc using the promo code ‘Globe30′, which offers a 30-day free trial and special pricing for the second month.

What we found

Ten Canadian-listed stocks involved in EV technology

CompanyTickerMkt. Cap. ($ Mil.)Recent Close ($)StockCalc Val. ($)Diff. (%)DCF Value ($)Price Comps ($)ABV ($)Analyst Tgt. ($)1Y Rtn. (%)
Sigma LithiumSGML-X 2,169.5 21.5524.9415.7-2.014.6324.9427.50252.7
Lion ElectricLEV-T 1,244.3 6.558.1824.92.293.3711.6814.46-73.7
Nano One MaterialsNANO-T 275.2 2.883.3114.8-1.711.197.68n/a-38.1
Canada Nickel Co.CNC-X 211.2 1.932.3622.0-1.351.804.865.86-45.2
Electra Battery Mat'lsELBM-X 155.8 4.805.106.2-1.3810.246.2714.03-15.3
Graphite OneGPH-X 127.7 1.481.44-2.7-2.441.520.682.138.0
Taiga MotorsTAIG-T 124.9 3.954.6317.1-29.576.124.979.00-51.5
Nickel 28 CapitalNKL-X 116.0 1.291.4714.03.404.731.131.8127.7
Giga MetalsGIGA-X 29.1 0.310.310.4-0.490.160.31n/a-18.7
NEO Battery MaterialsNBM-X 27.4 0.290.25-13.8-0.540.250.02n/a-13.6

Source: StockCalc

None of the companies shown pay a dividend.

You can see in the accompanying table the percentage difference between each stock’s recent closing price and its intrinsic value. The “StockCalc Valuation” column is a weighted calculation derived from the models and analyst target data, if used.

Four of these companies are on the manufacturing side (Lion Electric, Nano One Materials, Electra Battery Materials and Taiga Motors) and the rest focus on mining for one or more of nickel, cobalt, lithium or graphite. You will notice most of our DCF models are negative, which means we do not have positive cash flow visibility for most of these companies yet. Also note three of these companies do not have an analyst target, none pay a dividend and one-year returns range from 252.7 per cent to minus 73.7 per cent – these can be volatile stocks with high investing risk.

It is worth adding that battery technology is driving this movement and progressing very quickly. According to Gray, an engineering and design services provider, there are several new battery technologies that hold promise in different ways – faster charging, more cycles, less expensive, or longer lasting. These include zinc-manganese oxide, organosilicon electrolyte, gold nanowire gel electrolyte, and “string cell” batteries from Tanktwo, a Finnish-based startup.

Let’s look at a few of these companies:

Lion Electric Co. creates, designs and manufactures all-electric commercial urban trucks and all-electric buses and minibuses for the school, paratransit and mass transit segments. Our valuation models for Lion Electric indicate upside to its current price after having seen its stock price fall almost 75 per cent in the past 12 months. The stock is also listed on the New York Stock Exchange.

Sigma Lithium Corp. is constructing its wholly owned Grota do Cirilo Project in Brazil, one of the largest and highest-grade hard rock lithium deposits in the Americas. Sigma’s stock price has moved up more than 250 per cent on the back of the price of lithium, which has increased almost fivefold, from US$205 to US$1,010, in the past 12 months. Our overall valuation is showing more upside at this time. The stock also trades on the Nasdaq Stock Market.

Neo Battery Materials Ltd. saw its stock price jump 30 per cent on June 8 after signing a memorandum of understanding with the South Korean firm Automobile & PCB Inc. to advance the mass production facility of Neo’s silicon anode materials for EV lithium-ion batteries. This MOU has helped its valuation, but our models show some downside risk to Neo Battery’s price until the non-binding agreement can be converted into actual cash flow.

Investing involves risk. StockCalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.

Brian Donovan, CBV, is president of StockCalc, a Canadian fintech based in Miramichi, N.B.

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