Lynas Rare Earths (ASX:LYC) Valuation Spotlight After U.S. Supply Chain Deal With Noveon Magnetics

Lynas Rare Earths (ASX:LYC) just announced a Memorandum of Understanding with Noveon Magnetics to build a fully traceable, domestic U.S. supply chain for rare earth permanent magnets. This move comes as supply chain issues push demand higher, particularly in defense and infrastructure.

See our latest analysis for Lynas Rare Earths.

Lynas Rare Earths’ momentum has been remarkable lately. The 30-day share price return sits at 31.7%, and the year-to-date gain is a staggering 194.6%. While day-to-day moves have been choppy, the 1-year total shareholder return of nearly 150% speaks to renewed optimism after the latest deal and ongoing supply chain reforms. Investors appear to be pricing in growth potential as Lynas strengthens its critical role in the U.S. rare earths market.

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With such a dramatic run-up in Lynas’s share price and optimism building around the strategic U.S. supply chain deal, the big question now is whether the current valuation leaves room for further gains, or if markets are already anticipating future growth and pricing it in. Could this still be a buying opportunity?

Most Popular Narrative: 35.2% Overvalued

Lynas Rare Earths' consensus narrative assigns a fair value well below the last close price of A$19.24, putting current investor optimism to the test and highlighting a sharp disconnect between analyst forecasts and market expectations.

Investors appear to expect sustained above-trend pricing and demand, largely based on the belief that Western governments' ongoing support for supply chain diversification and critical mineral security will continue to provide Lynas with long-term government-backed offtake agreements and pricing floors. This is expected to drive higher future revenue and valuation multiples. There is an assumption that the accelerating global electrification transition (EVs, renewables, energy storage) will deliver consistent volume growth and greater pricing power for Lynas's rare earth products, which would underpin a long runway of strong top-line and earnings expansion.

Read the complete narrative.

Wondering why the narrative pegs fair value so far below today’s sky-high share price? The answer lies in daring growth estimates for both revenue and profit margins, but the real surprise is how much optimism has been built into the earnings and valuation path just a few years out. What’s fueling these punchy projections? Unpack the numbers and reasoning in the full story.

Result: Fair Value of $14.23 (OVERVALUED)

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

However, policy setbacks or unexpected competition could quickly shift sentiment and challenge the optimistic outlook that currently dominates the Lynas Rare Earths story.

Find out about the key risks to this Lynas Rare Earths narrative.

Build Your Own Lynas Rare Earths Narrative

If you think the consensus misses something or want to follow your own process, you can dive in and shape your own view in just minutes, Do it your way

A great starting point for your Lynas Rare Earths research is our analysis highlighting 1 key reward 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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