Chilean miner Sociedad Química y Minera is grinding through a newly-formed cup base with a 115.82 buy point, ahead of earnings due out next week. This lithium stock is today's IBD 50 Stocks to Watch pick.
The mining and fertilizer company holds the top spot out of 13 stocks in the Chemicals-Agriculture industry group, which is 124th out of 197 IBD groups.
The subsector has moved up from a low 159th place four weeks ago. The group's "C" Relative Strength Rating is suboptimal, with the ranking stretching from "A" to "E," with "A" the best and "E" the worst.
Fertilizer stocks have benefited from the Ukraine-Russia war, as Eastern Europe normally exports megatons of agricultural chemical products. As wheat prices soar and global food demand surges, these stocks have gained strength.
Sociedad is the world's leading producer of lithium, potassium nitrate, iodine and thermo-solar salts. It supplies its diverse product catalog to the health, nutrition, renewable energy and technology industries.
The company strives for responsible management of natural resources, and to reduce their carbon, energy and water footprints.
GE Partnership Provides Minerals For Millions
General Electric announced a deal with Sociedad in October, with its GE Healthcare business unit reaching a multiyear agreement to buy iodine. The mineral is used in X-rays and CT scans.
GE predicts the higher iodine shipments will allow them to serve 30 million more patients annually by 2025.
Lithium Stock: Relative Strength Hits New High
The lithium stock soared over 11 % in the last four weeks, and over 106% YTD. Share price is about 10% off its 52-week high.
It pulled back in heavy volume Wednesday after gapping up more than 9% Tuesday. Shares rose above the 50-day line in that session, posting higher-than-average volume.
SQM is grinding through a 43-day cup base. It tumbled after August's Q2 earnings and bottomed out in October. Strong buying interest since that time has lifted price within 9% of the 115.82 buy point.
The relative strength line hit a new high on the MarketSmith weekly chart, as indicated by the blue dot at the end of the line. The line has been trending up slowly since the end of December.
SQM stock holds a 97 Relative Strength Rating, telling investors its outperformed 97% of stocks that IBD tracks.
Will Sociedad Beat Earnings Expectations?
Sociedad beat top-line estimates but came up short on revenue in its Q2 earnings, released Aug. 17. Gross margin rose to 53.3% for the 6-month period ending June 30, up from 28.9% last year.
Earnings soared to $3.01 per share in Q2 2022, from 37 cents last year.
The company produced triple-digit sales growth for the last three quarters and boasts a 33% annual sales growth rate in the last three years, according to IBD Stock Checkup.
Annual earnings per share have grown 57% in the last three years, highlighting industry leadership. Analysts now expect a profit of $12.68 per share in fiscal year 2022, up from $2.05 in 2021. However, 2023 growth is expected to wane, flat at $12.79 per share.
Third-quarter earnings are scheduled for release on Nov. 16.
Lithium Stock Boasts Strong Fundamentals
Sociedad has earned an elite 97 Composite Rating, respectable 89 EPS Rating and best-possible "A" SMR Rating. The SMR Rating combines three gauges: sales growth, profit margins and return on equity (ROE). The rating goes from "A" to "E," with "A" being the best and "E" the lowest.
Their 22% return on equity exceeds the 17% minimum goal in the CAN SLIM investing strategy. ROE is a measure of how efficiently a company uses its money.
The company offers an attractive 3.4% annualized dividend yield to shareholders.
