Stock Analysis

MP Materials Corp. Just Recorded A 35% Revenue Beat: Here's What Analysts Think

  •  Updated
NYSE:MP
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MP Materials Corp. (NYSE:MP) defied analyst predictions to release its quarterly results, which were ahead of market expectations. Statutory earnings performance was extremely strong, with revenue of US$60m beating expectations by 35% and earnings per share (EPS) of US$0.09, an impressive 23%ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for MP Materials

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NYSE:MP Earnings and Revenue Growth May 9th 2021

After the latest results, the four analysts covering MP Materials are now predicting revenues of US$231.1m in 2021. If met, this would reflect a substantial 33% improvement in sales compared to the last 12 months. Earnings are expected to improve, with MP Materials forecast to report a statutory profit of US$0.50 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$208.0m and earnings per share (EPS) of US$0.37 in 2021. There has definitely been an improvement in perception after these results, with the analysts noticeably increasing both their earnings and revenue estimates.

Despite these upgrades,the analysts have not made any major changes to their price target of US$41.00, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic MP Materials analyst has a price target of US$50.00 per share, while the most pessimistic values it at US$31.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await MP Materials shareholders.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that MP Materials' revenue growth is expected to slow, with the forecast 46% annualised growth rate until the end of 2021 being well below the historical 101% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 0.8% annually. Even after the forecast slowdown in growth, it seems obvious that MP Materials is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards MP Materials following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at US$41.00, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for MP Materials going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with MP Materials , and understanding them should be part of your investment process.

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What are the risks and opportunities for MP Materials?

MP Materials Corp. owns and operates rare earth mining and processing facilities.

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Rewards

  • Trading at 53.4% below our estimate of its fair value

  • Earnings are forecast to grow 12.77% per year

  • Earnings grew by 146% over the past year

Risks

  • High level of non-cash earnings

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