AMG Lithium boom

A lithium refining pilot planned should be opened at the end of 2023 in Germany. AMG has recently profited from increasing lithium (and thus spodumene prices).

Graham Defensive Analysis

SECTOR: [PASS] AMG is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. AMG's sales of €1 489 million, based on 2022 sales, pass this test.

CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. AMG's current ratio €893m/€486m of 1.8 almost passes the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for AMG is €670 million, while the net current assets are €406 million. AMG fails this test.

LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. AMG's EPS were negative in 2013 and in 2020. 

EARNINGS YIELD: [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. AMG's E/P of 10% (using an estimated EPS of 4 Euros per diluted share) passes this test.

GRAHAM NUMBER VALUE:  [FAIL]  The Price/Book ratio must also be reasonable. T   hat is the Graham number value must be greater than the market price. AMG has a Graham number of √(15 x €3,2 EPS x 1,5 x €13 Book Value) = €30 

On the other hand, if earnings are EUR 6 per share, a multiple of 6*15 = EUR 90.

Dividend was being paid with sales of stock = effectively 0 %

Conclusion: Could be a pick for a green investor.