Stock Analysis

MP Materials Corp.'s (NYSE:MP) About To Shift From Loss To Profit

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NYSE:MP
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With the business potentially at an important milestone, we thought we'd take a closer look at MP Materials Corp.'s (NYSE:MP) future prospects. MP Materials Corp. engages in the ownership and operation of integrated rare earth mining and processing facilities. On 31 December 2020, the US$5.1b market-cap company posted a loss of US$22m for its most recent financial year. The most pressing concern for investors is MP Materials' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for MP Materials

Consensus from 4 of the American Metals and Mining analysts is that MP Materials is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$68m in 2021. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 68% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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NYSE:MP Earnings Per Share Growth May 4th 2021

We're not going to go through company-specific developments for MP Materials given that this is a high-level summary, however, take into account that typically a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 8.2% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of MP Materials to cover in one brief article, but the key fundamentals for the company can all be found in one place – MP Materials' company page on Simply Wall St. We've also put together a list of key factors you should look at:

  1. Valuation: What is MP Materials worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether MP Materials is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on MP Materials’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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