MP Materials MP is trading at a forward 12-month price/sales multiple of 14.29X, significantly above the industry average of 1.43X. The stock carries a Value Score of F, suggesting it is expensive at current levels.
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Among rare earth peers, USA Rare Earth, Inc. USAR and Lynas Rare Earths Limited LYSDY trade at considerably lower 8.31X and 9.43X, respectively.
MP Materials Stock Trails Industry Performance
MP Materials shares have declined 12.8% over the past six months against the industry’s 8.7% growth. The Zacks Basic Materials sector gained 3% while the S&P 500 rose 12.8%. Lynas Rare Earths and USA Rare Earth have declined 24.1% and 19.1%, respectively.
MP's 6-Month Performance Against Industry, Sector, S&P 500 & Peers
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The stock’s premium valuation appears difficult to justify given its recent underperformance. However, MP Materials is undergoing a significant transition toward higher-value rare earth products and domestic magnet production. Its latest financial results, production ramp-up, growth initiatives and execution risks provide important clues about whether the premium can be sustained.
MP Delivered Revenue Growth in Q2, Costs Remain Elevated
MP generated second-quarter 2026 total revenues of $108.5 million, up 89% year over year. The company also recognized $17.6 million in income related to a price protection agreement (PPA) with the Department of War (DoW).
Materials segment revenues surged 155% to $95.6 million, driven by higher NdPr sales volumes and pricing, although the absence of concentrate sales partly offset the gains. Magnetics segment revenues fell 17% to $16.5 million, as the start-up of magnet production and related pricing mechanisms weighed on results despite higher production of magnetic precursor products at the Independence facility.
Cost of sales climbed 43% due to higher sales volumes, while selling, general and administrative expenses rose 28% due to increased personnel costs. Start-up costs surged to $14 million from $0.76 million in the year-ago quarter due to the ramp-up of start-up activities for magnet production and chlor-alkali facilities, and costs associated with initial production of magnets at Independence.
Higher costs led to an operating loss of $32 million in the quarter, narrower than the loss of $43.9 million in the year-ago quarter. This was the 12th consecutive quarter of operating loss for the company, reflecting ongoing margin pressure as it continues transitioning toward higher-value separated rare earth products.
MP reported an adjusted loss of one cent per share in the second quarter of 2026, a significant improvement from the loss of 13 cents in the year-ago quarter.
MP Ramps Up NdPr and Advances Magnet Production
NdPr production increased 41% year over year to 840 metric tons in the second quarter of 2026 despite a scheduled semiannual maintenance outage at Mountain Pass. Management expects third-quarter 2026 NdPr production to exceed 1,000 metric tons as throughput and plant reliability improve.
MP remains on track to begin producing terbium and dysprosium later this year and first samarium production is targeted for 2028. The company recently entered into a multiyear agreement to supply gadolinium oxide to a leading U.S. aerospace and defense manufacturer.
Meanwhile, MP Materials is progressing with its magnet manufacturing operations. During the second quarter, MP Materials delivered magnets to General Motors Company GM for in-vehicle qualification testing and expects to begin commercial shipments in the fourth quarter, followed by a steady production ramp.
MP’s Earnings Estimates Trend Lower Cautious Investor Sentiment
The Zacks Consensus Estimate for MP Materials’ 2026 earnings stands at eight cents per share against a loss of 24 cents in 2025. The 2027 earnings estimate is currently pegged at 88 cents per share, implying growth of 1,009%.
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However, the earnings outlook has weakened recently, with consensus estimates for both 2026 and 2027 revised downward over the past 90 days.
Capacity Expansion Creates Long-Term Growth Potential for MP
The company is expanding operations at its Independence facility and has begun construction of the 10X magnetics facility. Commissioning activities for scaled heavy rare earth separation are also expected to begin soon at Mountain Pass. 10X will significantly expand MP’s fully integrated U.S. rare-earth magnetics manufacturing platform, which already encompasses mining and refining, metallization and alloying, sintering, finished magnet production and closed-loop recycling. Once operational, the new campus is expected to contribute to the company’s total production capacity of approximately 10,000 metric tons of NdFeB rare-earth magnets per year, advancing the nation’s ability to produce these strategic components domestically.
MP Materials has also worked with U.S. and allied drone manufacturers to launch Project Swarm, an industrial coordination initiative designed to aggregate and standardize future magnet demand. It has already signed subscription agreements with several participants. The company’s partnership with Apple AAPL on magnet recycling, magnet production and joint development also continues to advance.
High Costs and Execution Risks Could Limit Near-Term Upside
Producing separated rare earth products and magnetic materials involves significantly higher costs than concentrate production due to additional processing requirements, chemical inputs, labor and maintenance. Cost of sales is thus expected to trend higher, reflecting increased sales of NdPr oxide and metal along with added costs associated with magnetic precursor products. Start-up costs are also likely to increase in the coming quarters.
Management expects near-term Magnetics results to be affected by the roll-off of precursor revenues, early magnet production scaling, customer testing milestones and continued investment in personnel and product development. Full-year 2026 capital expenditures are expected at $500-$600 million as 10X and other projects advance. These costs can keep profitability and free cash flow uneven until higher-value production reaches greater scale.
Execution also remains a key risk. MP is simultaneously commissioning its dysprosium and terbium circuit, progressing through customer qualification at Independence, preparing for commercial magnet shipments and constructing the 10X facility. Delays in commissioning, customer qualification, production yields or construction could push out anticipated revenue and cash-flow benefits.
Our Final Take on MP Stock
MP Materials has a compelling long-term growth story, supported by rising demand for domestically produced rare earth materials, an integrated business model and investments in U.S. magnet manufacturing. Successful execution of its expansion projects could strengthen its position in the domestic rare earth supply chain and improve its earnings profile over time.
MP continues to report operating losses, faces elevated costs and substantial capital requirements, while earnings estimates have moved lower. More importantly, the stock trades at a significant premium to both the industry and key rare earth peers despite underperforming the broader market and industry over the past six months. Investors may want to remain on the sidelines until the company demonstrates more consistent earnings improvement and better execution of its expansion plans.
MP currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).