One-glance verdict
Overvalued
$4.03 our estimate vs market $10.28
155% above our estimate, beyond the bull case
Fundamentals snapshot
Lynas Rare Earths Limited
LYSCF · OQX · Basic Materials · Other Industrial Metals & Mining
Current price
$10.28
52-week range
$7.80 - $16.20
Market cap
$10.35B
Balance sheet
Healthy
16.95x Strong cushion
Net cash $624.56M. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
1 Risk
3 rewards · 1 risks
- Reward Revenue grew 80.2% last year.
- Reward Returns 7.6% on equity, ahead of 80% of its peers.
- Reward Free cash flow was positive in 1/10 years.
- Risk Operating margin compressed from 42.1% to 28.1% over 3 years.
What this company does
Lynas Rare Earths Limited
Lynas Rare Earths mines and processes special minerals that are essential ingredients for modern technology like electric cars, wind turbines, and smartphones. The company earns its money by selling these processed materials to manufacturers around the world. This is important because Lynas operates a key supply chain (the entire process from mining to delivering the final product) for these minerals outside of China, giving countries a vital alternative source.
How the company got here
Lynas started in 1983 as a gold mining company in Australia. [6] A major turning point came in 2001 when it sold its gold business to focus on rare earths, a group of special metals, by buying the Mt Weld deposit, one of the world's richest sources. [6, 8] The company became critically important after 2010 when China, the world's main supplier, restricted its exports of these metals, causing prices to soar. [8, 15] To grow, Lynas built a large processing plant in Malaysia with financial help from Japanese partners who wanted a stable supply for their technology companies. [6, 15] This move established Lynas as the most significant producer of rare earths outside of China. [14]
What it actually does
Lynas is a mining company that digs up and processes a special group of 17 metals called rare earth elements. [1, 2] Despite their name, these metals aren't actually that rare, but they are difficult to mine and separate. [1] These materials have unique magnetic and electronic properties that make them essential ingredients for many modern technologies, such as powerful magnets in electric vehicle motors and wind turbines, as well as components in smartphones, laptops, and military equipment. [3, 4, 5] Lynas digs up the ore (rock containing the valuable minerals), processes it into a concentrated form, and then separates it into the individual rare earth materials that manufacturers need. [13]
Mining and Processing Rare Earths
The company operates as one single business focused on getting rare earth materials from the ground to its customers. It all starts at its Mt Weld mine in Western Australia, where the raw ore is dug up and put through an initial process to create a concentrated powder. [10, 14] This concentrate is then sent to the company's processing facilities, including a large, advanced plant in Malaysia and a newer facility in Kalgoorlie, Australia. [13, 14] At these plants, complex chemical processes separate the different rare earth elements from each other, creating the final, high-purity products that customers like magnet makers and electronics companies buy. [13] This entire integrated process represents how the company makes all of its money. [7]
What management is betting on now
The company's current strategy, called 'Towards 2030', is focused on growing bigger to meet the increasing demand for rare earths, especially for electric vehicles and renewable energy. [12, 17, 20] A key part of this plan is expanding its existing mines and processing plants in Australia and Malaysia to produce more material. [10] Management is also building new facilities, including one in the United States, to create a more secure supply chain (a network of companies involved in producing and distributing a product) for customers outside of China. [8, 18] This strategy aims to solidify Lynas's position as the leading non-Chinese supplier and to potentially move into making more advanced products like the metals and magnets themselves. [12, 20]
Price history
How the share price has moved
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Is it cheap or expensive?
Fair value $4.03 vs current price $10.28
Our most-likely fair value is $4.03 a share — about 60.8% below today's price of $10.28, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Healthy
Net cash $624.6M - more cash than debt. Interest coverage 16.9x.
Net debt
$-624.56M
Interest coverage
16.95x
Lynas Rare Earths Limited's profit covers its interest bill about 16.9 times over. which is stronger than every peer shown here and 4 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Healthy
Worse cushion
Baseline
Better cushion
LYSCF
BASELINE
Lynas Rare Earths Limited
Total debt $242.67M Interest coverage 16.95x This is the baseline the peer rows are being compared against.
Total debt $981.62M Interest coverage -4.61x -100% vs LYSCF This peer has almost no interest-payment cushion compared with LYSCF.
Total debt $2.00B Interest coverage 0.32x -98% vs LYSCF Carries about 52.3x less debt cushion than LYSCF.
Total debt $678.34M Interest coverage -609.37x -100% vs LYSCF This peer has almost no interest-payment cushion compared with LYSCF.
Total debt $379.00K Interest coverage -2.66x -100% vs LYSCF This peer has almost no interest-payment cushion compared with LYSCF.
What you should know
The case for and against LYSCF
3 Rewards
1 Risk
Rewards
-
Revenue grew 80.2% last year.
-
Returns 7.6% on equity, ahead of 80% of its peers.
-
Free cash flow was positive in 1/10 years.
Risks
-
Operating margin compressed from 42.1% to 28.1% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
64.25x
Forward P/E
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P/B
4.11x
P/S
10.58x
EV/EBITDA
34.00x
PEG ratio
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Profitability
How much profit each dollar creates
Gross margin
40.1%
Operating margin
28.1%
Net margin
22.7%
ROE
7.6%
ROA
4.1%
Health
Liquidity and balance-sheet strength
Debt / equity
0.10x
Current ratio
9.35x
Quick ratio
8.01x
Total debt
$242.67M
Total cash
$867.23M
Growth
How the business has been compounding
Revenue TTM
$701.44M
Revenue 5Y CAGR
7.5%
EPS TTM
0.16
EPS 5Y CAGR
-75.8%
Cash flow
How much cash the business throws off
Operating CF TTM
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Free CF TTM
$100.80M
FCF margin
14.4%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
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