Shares in Australian lithium player Pilbara Minerals Ltd (ASX: PLS) are pushing up into the green today on no news.
At the time of writing, the Pilbara Minerals share price is trading nearly 6% higher at $4.86 apiece.
As seen below, the share took off in near-vertical fashion from June/July.
Investors have rallied the share in 2022 after an initially difficult period on the chart earlier in the year.
Pilbara shares first reached highs of $3.76 back on 18 January. They then bottomed at $2.04 on 20 June before the market took a turn to the upside.
Equities caught a strong bid across the board in the June/July bounce amid more certainty around inflation and interest rates.
Central Banks around the world have now stepped up to the task of reducing inflation. And it is clarity on this stance that's given investors short-term confidence.
However, Pilbara has far outpaced the majority of its ASX constituents in the back end of 2022. The stock now trades at 52-week highs at the time of writing.
Image source: Getty Images
Are there tailwinds for Pilbara?
Helping spur the upside has been a multivariate equation comprising lithium, batteries, electric vehicles (EVs) and general market activity.
In particular, the surge in demand for EVs has been a net positive for both Pilbara and the price of lithium, with each now trading at all-time highs.
And there looks to be no signs of slowing down. Recent projections by the China Association of Automobile Manufacturers (CAAM) estimate China will sell more than 6 million EVs this year.
Meanwhile, the United States Government's recent Inflation Reduction Act also provides further tax breaks for those owning an EV.
This is coupled with a wind-back in internal combustion engine production and usage throughout Europe. Some areas are mandating the use of electric mobility in certain zones.
Alas, the landscape for mobility is shifting before our eyes, and it appears to be a lithium-electric vehicle battery-driven story.
This is also relevant to Pilbara considering its battery metals exchange (BMX) auction that takes place on a routine basis.
In addition, the price Pilbara hopes to receive from its own lithium production will directly impact factors such as earnings, return on invested capital and free cash flows. Three critical components in growing corporate value.
It therefore stands to reason that with an expanding price differential in the market for lithium [carbonate, spodumene, battery grade], this will continue to inflect positively on the Pilbara Minerals share price.
Pilbara Minerals share price snapshot
In the meantime, the Pilbara Minerals share price has gained more than 51% this year to date. Pilbara shares are up more than 112% for the past 12 months.
The Pilbara share price trades on a price-to-earnings (P/E) ratio of 24.8x and is priced at more than 10.6x its own book value of equity.
These multiples are each ahead of the GICS Materials Industry peer median scores of 7.25x and 2.9x respectively, according to Refinitiv Eikon data.
As a result, looking at these valuations, questions arise as to whether Pilbara is overvalued relative to its peers at present.
