What Needs To Be True To Buy USA Rare Earth Stock?

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USA Rare Earth (USAR) stock has fallen 55.9% over the past year, while the S&P 500 returned 15.0%. The lower stock price does not make the investment decision easy, as the company is still building plants to manufacture magnets that are not yet on the market. As of its August call, management expected its first magnet sales by the end of 2026. That was Barbara Humpton’s last call as CEO. Thras Moraitis took over on October 1. Three things must go right: magnet sales need to start, heavy rare earth supply from Serra Verde needs to arrive, and the metal the company currently sells must bring in more than it costs to produce. Start with how much you are paying for the sales USA Rare Earth makes today.

How Much Do USA Rare Earth’s Sales Cost You?

At the October 27 close, investors paid 181.8 times USA Rare Earth’s revenue over the twelve months to June, against 3.2 times for the S&P 500. Those sales figures predate the company combining with Serra Verde on September 4. That price-to-sales ratio remains so high because the company still sells little. Management noted that second-quarter revenue of about $6 million came from the metal and alloy making business.

The magnet business only entered production in the second quarter. Management expects the Stillwater plant to reach 600 metric tons of yearly capacity by the end of 2026, scaling to 1,200 metric tons early in 2027. At this price, investors are paying for the Serra Verde mine and for magnet sales the company has yet to make.

USA Rare Earth Is Still Far From A Profit

Over the twelve months to June, USA Rare Earth posted an operating loss equal to 946.1% of its revenue, while the S&P 500, taken as one company, earned an operating margin of 18.5%. The company spent about $45 million on operating expenses in the second quarter alone. Management said that figure included higher legal and consulting costs related to its acquisitions.

What Does Serra Verde Give USA Rare Earth?

According to the company, Serra Verde provides an upstream heavy rare earth operation in Brazil, connecting to USA Rare Earth’s own processing, metal making, and magnet manufacturing in a combination completed on September 4. That matters because the raw material shortage hitting the industry is most acute in heavy rare earths, management noted in August. At the time, the company was seeking other sources ahead of its expected access to feedstock from Serra Verde.

That supply matters for the magnets the company plans to sell. Management says heavy rare earths used in magnets are scarcer outside China than at any point in recent memory. The company holds memorandums and letters of intent with large multinationals covering 2,500 metric tons a year, several of which have already converted into production purchase orders.

The risk is cost, and it already shows in the metal the company sells today. Gross margin fell to -27.2% in the second quarter, compared with 1.9% in the first. That negative margin means the metal cost more to produce than it sold for, a loss management tied to higher raw material input costs.

Management stated in August that it had already raised its prices and expects the increases to show in the coming quarters. Gross margin on those metal and alloy sales is the number to watch when USA Rare Earth reports its third-quarter results, expected in November 2026.

How To Act On USAR?

Now you know USA Rare Earth better. Our purpose is to inform you so you can decide for yourself, and acting on one stock, in either direction, carries its own risk.

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