Valuing GMG and PLS: Data Centres vs Lithium Cycle

Goodman Group (ASX:GMG) shares have risen 2.2% since the start of 2025. Pilbara Minerals (ASX:PLS) trades 398.3% above its 52-week low. Both stocks sit at different points in their industry cycles, and the valuation case for each depends on which cycle you believe still has momentum.

GMG’s business is industrial property – data centres, logistics warehouses, last-mile distribution hubs. The bull case centres on AI-driven demand for data centre space and e-commerce logistics. The bear case is that cap rates compress further as interest rates stay higher, and the development pipeline delivers more supply than demand can absorb. The stock’s multiple already prices in a lot of growth. At current levels, the market assumes GMG can sustain double-digit earnings growth for several years. If the rate cycle turns slower than expected, that multiple contracts.

PLS is a lithium producer. Its cycle is tied to lithium carbonate prices, which have been volatile. The stock’s 398% bounce from the 52-week low reflects a recovery in lithium pricing and expectations that supply cuts will tighten the market. The risk is that the recovery is priced in before it materialises. PLS needs sustained lithium prices above $12,000 a tonne to generate free cash flow at current production rates. If prices stall or fall back, the stock’s leverage to the commodity works in reverse.

The two stocks share one structural risk: both depend on a macro outcome that is not yet confirmed. GMG needs lower rates to re-rate. PLS needs higher lithium prices to justify its current enterprise value. Neither is obviously cheap on traditional metrics. GMG trades at a premium to net tangible assets. PLS trades at a multiple of trailing earnings that assumes the lithium price recovery is permanent.

For a trader building a watchlist, the question is which cycle has more room to run. GMG’s data centre thesis has a longer runway – AI infrastructure spending is still early – but the valuation leaves little room for error. PLS’s lithium thesis is more binary: either the supply cuts work and prices stabilise, or they don’t and the stock retests the lows. The safer bet is probably GMG. The bigger upside, if the lithium cycle turns, is PLS.

Neither stock is a clear buy at current levels. Both are worth watching for the catalyst that confirms or breaks the cycle. For GMG, that catalyst is the next RBA decision and the data centre leasing pipeline. For PLS, it is the next quarterly production report and the spot lithium price trend.

For a more detailed comparison of the two stocks, read GMG and PLS: Two Cycles, Two Valuation Cases.