REX American Resources (REX): Reassessing Valuation After Stable Q3 Results and Softer Year-to-Date Profits

REX American Resources (REX) just posted its third quarter numbers, showing sales essentially flat year over year while earnings per share inched higher, even as year to date net income drifted lower.

See our latest analysis for REX American Resources.

That steadiness in the latest earnings comes after a strong run, with the share price up about 55% year to date and a 1 year total shareholder return of nearly 61%. This suggests positive momentum despite recent profit pressure.

If REX's move has you rethinking where growth might come from next, it could be worth exploring fast growing stocks with high insider ownership as a way to uncover other high conviction ideas.

With shares already up sharply this year despite softer year to date profits and a low value score, the key question now is whether REX American Resources still trades below its true worth or if the market has already priced in future growth.

Price-to-Earnings of 21.7x: Is it justified?

On a price-to-earnings basis, REX American Resources trades at 21.7 times earnings, with the last close at $33.12. This leaves the shares looking inexpensive against direct peers but pricey versus the wider oil and gas space.

The price-to-earnings multiple compares what investors pay for each dollar of current earnings, a key lens for a mature, profitable ethanol producer like REX. In this case, REX screens as good value versus its comparable companies, where the average P/E stands much higher at 32.5 times, suggesting investors are not applying a premium despite strong long term earnings growth.

However, against the broader US Oil and Gas industry, the picture flips. REX looks expensive on 21.7 times earnings compared with the sector average of 13.2 times. That richer sector relative multiple, combined with the SWS DCF model indicating the shares are trading above an estimated fair value of $17.78, hints that the market may be assigning REX a valuation that assumes more resilient profits than the industry norm.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 21.7x (OVERVALUED)

However, investors should watch for margin pressure from ethanol oversupply and any downturn in corn-based feedstock economics that could quickly squeeze profitability.

Find out about the key risks to this REX American Resources narrative.

Another way to look at value

While the price to earnings ratio makes REX look expensive versus the broader industry, it still trades well below the 32.5 times earnings average of its closest peers. That gap could either close if sentiment turns, or widen if the market decides recent profit softness is the new normal.

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out REX American Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 915 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own REX American Resources Narrative

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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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