The Vulcan Energy Resources Ltd (ASX: VUL) share price closed lower today, finishing 1.33% in the red at $8.89.
It's been a one-way affair for Vulcan shares over the last few months. Prices have trended downwards, reaching a low of $8.18 in February.
The lithium company recently signed an offtake agreement with German municipal energy giant MVV Energie AG for 240-gigawatt hours per year of renewable heat.
However, without any realised value until 2025, investors will have to wait a few years for the cash flow to pass through to the bottom line.
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Is Vulcan a buy?
Vulcan has narrow coverage but, of the three analysts rating the stock, all have it as a buy and/or speculative buy, according to Bloomberg data.
Consensus from this list has the company valued at $19.07 per share – almost 115% upside potential.
In fact, discounting Berenberg's price target of $14.20 a share, Alster Research and Canaccord Genuity value Vulcan at $20 and $23 a share respectively.
Alster recently noted Vulcan's potential upside if Germany continues its push away from reliance on Russian energy imports. According to the broker:
Clearly, Vulcan would benefit from an increasing penetration of geothermal energy by streamlined regulatory procedures, as it would simultaneously help identify and develop the lithium deposits within the granted licenses.
Overall, we expect the conditions for Vulcan to receive a further impetus not only due to the conflict, but also due to the fulfilment of climate targets.
Meantime, long-duration stocks – those that deliver cash flows and returns in the distant future – have taken a beating in 2022.
Vulcan's been no exception. It reported $631,542 in revenue for the 12 months to 30 June 2021, made up mostly of interest income and a tax incentive.
The company's acquisition of the Insheim geothermal power plant in Germany allows Vulcan to book revenue on a forward basis. The company said, "it is anticipated [the plant] will be a source of revenue".
Nevertheless, after some volatility, shares have traded mostly sideways over the past three months and are down around 12% in that time.
Towards the end of last year, Vulcan settled a legal dispute with short-selling firm J Capital Research USA. The latter accused Vulcan of producing faulty economics at its geothermal-lithium plant in Germany, sparking a fierce legal battle.
As a result of the court's findings, J Capital is permanently restrained from "disseminating, publishing or republishing any matter of and concerning the company, and its directors and officers", Vulcan said at the time.
J Capital managing partner Tim Murray also sent a letter of apology to Vulcan for its allegations regarding the company's board and management team, according to various media reports in December last year.
Vulcan share price snapshot
Over the past 12 months, the Vulcan share price has jumped 38% higher despite shedding 14.5% year to date.
The company has a current market capitalisation of $1.17 billion.
