Liontown Resources (ASX:LTR): Reassessing Valuation After Ford Deal Restructure Expands Sales Flexibility

Liontown Resources (ASX:LTR) recently made headlines by updating its offtake and loan agreements with Ford Motor Company. These changes halve future lithium deliveries and defer loan repayments, providing the company with greater financial flexibility and more diverse sales options.

See our latest analysis for Liontown Resources.

Liontown’s recent updates with Ford and progress at Kathleen Valley come on the back of a strong share price return, with the stock up 76% year-to-date and 26% in the past month. This shows renewed momentum after a rocky start to the year. Despite some setbacks over the longer term, the company’s 20% total shareholder return over the past year signals that sentiment is shifting, with investors keeping a close watch as operational flexibility improves.

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The real question now is whether Liontown’s strong share price gains still leave room for upside, or if the market has already factored in all of its future growth. Is there a real buying opportunity here, or is everything priced in?

Most Popular Narrative: 53.8% Overvalued

Compared to the latest close at A$1.01, the most-followed narrative suggests Liontown’s fair value sits far lower. This is driven by higher profit margin expectations paired with a significantly reduced multiple. Here is what’s influencing the current consensus valuation:

The analysts have a consensus price target of A$0.626 for Liontown Resources based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$1.15, and the most bearish reporting a price target of just A$0.35.

Read the complete narrative.

Want to peek behind the curtain? This narrative reflects major profit margin improvements and a substantial decline in future profit multiples. Wondering which expectations and projections drive this verdict? The complete analysis details the formulas and analyst debates that inform the current price target. Discover the key assumptions that cause the numbers to fluctuate.

Result: Fair Value of $0.65 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing industry competition and potential cost overruns in underground operations could present challenges to these positive forecasts and impact Liontown's future net margins.

Find out about the key risks to this Liontown Resources narrative.

Another View: SWS DCF Model Suggests Upside

While analysts see Liontown as overvalued based on their consensus price target, our SWS DCF model presents a very different perspective. It calculates a fair value near A$2.06, which is significantly above the current share price. This suggests there could be hidden value the market is overlooking. Which view will prove right in the long run?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Liontown Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Liontown Resources Narrative

Prefer to dive into the numbers yourself or take a different view? It takes just a few minutes to build your own valuation story, so why not Do it your way

A great starting point for your Liontown Resources research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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