Should I buy PLS Group shares in April?

The S&P/ASX 200 Index (ASX: XJO) share PLS Group Ltd (ASX: PLS) has been one of the strongest performers over the past six months, rising by around 130%, as shown in the chart below.

When it comes to a return of that size, I think it’s a good idea to remember that disclaimer that past performance is not a reliable indicator of future performance.

I’m certainly not expecting another 130% rise in the next six months.

But it is worth considering whether the ASX-listed lithium share is a buy and could rise from here.

What do experts make of the PLS Group share price?

According to CMC Invest, of 13 ratings on the business over the last three months, six have been buys, six have been holds, and one has been a sell.

However, due to the strength of the recent rise – it’s up 25% this year alone – it has flown past previous price targets. A price target is where experts think the business will be trading in 12 months from the time of the rating.

Of those 13 ratings, the average price target is $4.72. That suggests a possible decline of more than 12% from where it is at the time of writing.

The most optimistic price target is $5.53, suggesting a potential 2% rise.

The lowest price target is $2.47, implying a possible decline of more than 50% over the next 12 months.

Is the ASX lithium share good value?

I can understand why the market is more excited about the business. The lithium price has increased, and the Middle East conflict has highlighted the risks of being dependent on fossil fuels, including how the cost can jump if the supply is impacted.

Electric vehicles look a lot more appealing, and I wouldn’t be surprised to see elevated demand for the foreseeable future.

I’m not sure how much this will accelerate global demand for (lithium) batteries across cars, trucks, and heavy equipment, but I believe this will certainly help significantly.

It is somewhat surprising how much the PLS Group share price has risen – it’s back to where it was a few years ago, but the lithium price is still significantly lower.

The earnings estimate on CMC Invest suggests the business could generate 23.6 cents of earnings per share (EPS) in FY27. That means that it’s valued at more than 22x FY27’s estimated earnings.

I’m optimistic about long-term demand for lithium because of electrification and energy storage requirements. I also believe PLS Group will continue growing its total production over time to supply that demand

However, this doesn’t seem like a good time to invest unless the lithium price were to rise significantly from here.

I’d look at other opportunities available to Australians.

The post Should I buy PLS Group shares in April? appeared first on The Motley Fool Australia.

More reading

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• Here are the top 10 ASX 200 shares today
• ASX lithium shares ‘compelling’ as top broker adjusts ratings
• 3 reasons to buy this high flying ASX lithium stock for the long term
• The war in Iran has inspired an unexpected ASX 200 market trend

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.