My take: PT=C$13 based on 2024 analyst consensus estimation E2024 Analyst Revenue consensus = US$282.5M
E2024 Analyst EPS consensus = US$0.65 / share or E2024 Earnings = US$42M (US$0.65 x 64M sh)
Considering the fact that Depreciation alone already = ~US$20M I conservatively estimate that E2024 EBITDA = US$62M or C$84M.
Enterprise Value (EV) is considered to be the economic worth of a company.
EV / EBITDA multiple (enterprise-value-to-EBITDA) is one of the common tools used by financial analysts to estimate the target prices of a company.
During the early stage of Maracas production ramp-up in 2014, Dundee Capital Market estimated Largo’s target prices by using 8 x EV / EBITDA multiple. For argument’s sake, let’s assume EV / EBITDA multiple = 10x for our scenario.
So if we assumed the following:
E2024 EBITDA = US$62M
Net Debt = 0
EV / EBITDA = 10X (i.e EV = 10 x EBITDA)
Then the Target Price would = US$620M / 64M shares = US$9.7 = ~C$13
The following is an excerpt from Capital10X article “Largo Reports Stabilizing Costs, Rebounding Production in Q2 2023”written by Duane Hope on Aug 16 2023:
At nameplate capacity around 3,000 tonnes per quarter we estimate Largo can produce over $80 million of EBITDA and this excludes any growth in the battery business or contribution from the Ilmenite plant. At the current enterprise value Largo is trading for only 3.0x EBITDA, compared to an all-time low of 3x, a peer median of 6x, Largo’s own historical median of 12x and as high as 36x during the last vanadium bull.
Largo Multiple at an All-Time Low
Source: Bloomberg, Largo, Capital10X Estimates
DYODD