Shares of Arcadium Lithium (ALTM -5.33%), the giant lithium mining stock formed from the merger of America's Livent and Australia's Allkem in January, exploded higher on Monday, rising 12.2% through 10 a.m. ET. And the reason? The company just filed an amended 10-K annual report with the U.S. Securities and Exchange Commission (SEC), giving investors its latest up-to-date numbers on how it looks post-merger.
What we know about Arcadium Lithium
What did investors learn about Arcadium today? Let's start with the basics.
Arcadium Lithium boasts a market capitalization of $4.2 billion, with cash and debt levels roughly in balance (only about $70 million more debt than cash). The company did $882 million in sales last year, earned $400 million in operating profit, and $330 million in net profit, and therefore sells for a very reasonable 12.7x trailing earnings.
So far, so good.
But things turn bad on the cash-flow statement. There we learn that Arcadium didn't generate any cash profit at all -- despite reporting hundreds of millions of dollars of accounting profit.
Is Arcadium Lithium stock a buy?
As it turns out, all of the above was already revealed by Arcadium Lithium in its last, unamended 10-K filing. (The new filing added details on such odds and sundries as executive compensation, corporate governance, and related transactions). As such, while I understand investors reacting positively to additional disclosure from management, I suspect that today's buying frenzy surrounding Arcadium Lithium stock is a bit irrationally exuberant.
While nominally profitable, this lithium miner currently isn't generating any free cash flow for its shareholders. When you further consider that most analysts who follow it predict that GAAP profits will fall steeply this year and Arcadium won't generate any free cash flow for the next two years, I'm forced to conclude: Arcadium Lithium stock is still a sell.
