Critical Analysis: USA Rare Earth (NASDAQ:USAR) versus REalloys (NASDAQ:ALOY)

REalloys (NASDAQ:ALOY) and USA Rare Earth (NASDAQ:USAR) are both small-cap materials companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, analyst recommendations and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and target prices for REalloys and USA Rare Earth, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
REalloys	1	0	1	1	2.67
USA Rare Earth	1	0	9	1	2.91

REalloys currently has a consensus price target of $16.00, suggesting a potential upside of 156.57%. USA Rare Earth has a consensus price target of $32.29, suggesting a potential upside of 306.98%. Given USA Rare Earth’s stronger consensus rating and higher probable upside, analysts plainly believe USA Rare Earth is more favorable than REalloys.

Insider and Institutional Ownership

3.6% of REalloys shares are owned by institutional investors. 20.1% of REalloys shares are owned by insiders. Comparatively, 9.1% of USA Rare Earth shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

REalloys has a beta of 1.43, suggesting that its share price is 43% more volatile than the S&P 500. Comparatively, USA Rare Earth has a beta of 2.79, suggesting that its share price is 179% more volatile than the S&P 500.

Profitability

This table compares REalloys and USA Rare Earth’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
REalloys	-5,145.12%	-192.93%	-163.20%
USA Rare Earth	-716.54%	-12.81%	-10.79%

Valuation and Earnings

This table compares REalloys and USA Rare Earth”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
REalloys	$2.43 million	178.78	-$4.43 million	($3.16)	-1.97
USA Rare Earth	$1.64 million	1,183.76	-$297.56 million	($0.81)	-9.79

REalloys has higher revenue and earnings than USA Rare Earth. USA Rare Earth is trading at a lower price-to-earnings ratio than REalloys, indicating that it is currently the more affordable of the two stocks.

Summary

USA Rare Earth beats REalloys on 9 of the 14 factors compared between the two stocks.

About REalloys

REalloys Inc. is a rare earth materials company focused on producing rare earth metals and alloys used in permanent magnets and other advanced applications. Its products support industries including automotive, clean energy, electronics and defense. The company’s activities include processing rare earth materials into metal and alloy products for manufacturers. REalloys operates through Less Common Metals, a UK-based rare earth alloy producer, and is working to expand rare earth processing and production capacity in North America.

About USA Rare Earth

USA Rare Earth, Inc. is developing a U.S.-focused supply chain for rare earth materials and permanent magnets used in electric vehicles, wind turbines, electronics, aerospace and defense applications. Its planned activities span mineral extraction, materials processing and magnet manufacturing. The company is advancing the Round Top deposit in West Texas, a project that contains rare earth elements as well as other minerals used in advanced technologies. USA Rare Earth has described the deposit as a potential source of both light and heavy rare earths, which are important inputs for high-performance magnets and other industrial products.