Valued at a market cap of $700 million, Neo Efficiency Supplies (TSX:NEO) manufactures and sells uncommon earth supplies, magnetic powders, magnets, and specialty metals globally via three segments: Magnequench, Chemical substances & Oxides, and Uncommon Metals.
Neo produces bonded neodymium-iron-boron powders for automotive functions, in addition to industrial supplies for catalysts and electronics. Moreover, it provides specialty metals corresponding to tantalum and gallium for aerospace, medical, and know-how functions.
Based in 1994, Neo serves numerous industries together with automotive, electronics, petroleum refining, and renewable vitality throughout worldwide markets.
Is the TSX inventory purchase proper now?
During the last 12 months, NEO inventory has greater than doubled, outperforming the broader market by a big margin.
Regardless of a difficult macro atmosphere, Neo Efficiency Supplies delivered sturdy second-quarter outcomes that exceeded expectations. A robust Q2 efficiency allowed firm administration to boost full-year EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) steerage for the second time in 2025.
In Q2, the uncommon earth supplies specialist reported adjusted EBITDA of $19 million, a 42% enhance year-over-year, whereas first-half EBITDA totalled $36 million, up 50% from the prior 12 months.
Income for the quarter reached $115 million, a 7% enhance pushed by greater volumes within the Magnequench phase and improved product combine in uncommon metals. The corporate’s adjusted EBITDA margin expanded by 400 foundation factors year-over-year to 16.5%, indicating operational enhancements and a beneficial product combine throughout all segments.
Future progress
Based mostly on sturdy first-half efficiency and continued demand energy, Neo raised its full-year EBITDA steerage from $55–60 million to $64–68 million. CEO Rahim Suleman highlighted that NEO has moved “decisively from strategic evaluation to targeted execution” following a complete analysis that concluded accelerating NEO’s present technique would maximize shareholder worth.
The corporate’s European facility stays a key driver of future progress. This facility has already secured a number of business awards, together with a brand new contract from a distinguished European Tier 1 provider for battery-powered traction motors, valued at $50 million in cumulative income. Part 1A provides 2,000 tons of annual capability, increasing to five,000 tons in Part 1B, with long-term targets of 20,000 tons yearly.
Neo’s strategic positioning has garnered worldwide recognition, with European Fee President Ursula von der Leyen showcasing the corporate’s “Made in Europe” magnet on the G7 Leaders Summit. Latest U.S. Division of Protection commitments to uncommon earth everlasting magnet manufacturing underscore the rising strategic significance of localized provide chains.
All three enterprise segments contributed to the sturdy efficiency. Magnequench achieved its highest quarterly EBITDA since 2022, with bonded magnet volumes up 36% and bonded powder volumes rising 30%.
The Chemical substances & Oxides phase doubled its EBITDA year-over-year, benefiting from the brand new emissions catalyst facility and improved operational effectivity.
Uncommon Metals delivered $11 million in EBITDA regardless of normalized hafnium pricing, supported by sturdy gallium demand and geopolitical provide considerations.
With $80 million in money, roughly $45 million in further mortgage capability, and entry to $5 million in European authorities grants, Neo maintains monetary flexibility to fund strategic initiatives whereas returning capital to shareholders via dividends and share repurchases.
Is the TSX inventory nonetheless undervalued?
Analysts monitoring NEO forecast income to rise from $475.9 million in 2024 to $816 million in 2029. On this interval, adjusted earnings are forecast to increase from $0.05 per share to $1.12 per share.
If the TSX inventory is priced at 20 occasions ahead earnings, which isn’t too costly, it should commerce round $23 in early 2029, indicating an upside potential of over 45% from present ranges. After adjusting for dividend reinvestments, cumulative returns may very well be nearer to 55%.
