The price-to-book ratio (P/B ratio) compares a firm's market capitalization to its book value. In other words, the P/B ratio shows the value given by the market (share price) for each dollar of the company’s net worth (book value).
Largo’s P/B ratio = ~64% = LGO is trading at a discount of 36%. The market is underpricing the stock in a big way as the value of Largo's assets, if sold, would be a lot higher than its market cap.
Largo is facing a difficult time with regard to making a profit because of the non-recurring high costs generated by the vertical integration of LCE but is the company in financial distress as short sellers want investors to believe?
Largo’s financial statements show that it has US$153M in Cash, Accounts Receivable and Inventory while only US$90M in Short / Long Term Debt and A/P.
So Largo is not in any way shape or form in financial distress.
Rick Rule is saying that although the stock has gone down but the free cash flow has not gone down nor has the prospectivity of the mine. Therefore LGO can be a very attractive target for value investors hoping to be rewarded when the share prices start to reflect the company’s fundamentals as per their analysis.
Imho, investors are staying on the sidelines waiting for a signal / trigger to act. Personally I believe that we only need one or two positive NRs to send LGO back on the road of recovery.
My humble 2-ct worth.
DYODD