Valuation...

There will always be questions about the valuation of Lynas.  Here is a brief analysis of LYC utilizing a popular Fundamental Analysis strategy (CANSLIM) as an outline...

Current Earnings... Current (Q2) earnings are ~$42m on revenues of $116m... Compare this to the previous quarter of $13m in earnings on revenues of $88m... Earnings increased by nearly $29m over the previous quarter... Not only are the earnings increasing, they have also been accelerating and looking back a few quarters this is a consistent trend...

Annual Earnings... For FY 17 annual earnings were a loss of $14m compared to the previous year's (FY 16) loss of $55m. This years annual earnings are $55m on the plus side at the halfway point and like current earnings are also accelerating... Earnings next quarter may approach $50m resulting in a leading annualized profit of ~$200m...

Shares outstanding... Lynas just finished a 1 to 10 share consolidation with outstanding shares somewhere around 600m. There may be some additional dilution but the 600 number should be close. The outstanding shares are on par with other companies in similar industries so financial comparisons are easier...

Debt... It pretty clear Lynas will be paying down the entire debt within the next couple of years, probably sooner. It is not unusual for a startup or turnaround company to incur debt. I remember Lynas was in pretty dire straits when the current debt was issued and we were all pretty grateful for the bailout.  Now that Lynas is no longer a turnaround, repaying the debt is a hard pill to swallow but the continued excellent relationship with existing customers will be indispensable as a result...

New Products and Industry... Lynas is defining a new industry with equally new processes to satisfy the exponential growth that is predicted in the RE markets. . There is no question that Lynas is the ROW industry leader and is putting a lot of daylight between themselves and the competition. That said, there are few major players in the ROW RE industry making it hard to define the Lynas performance within the RE industry... RE processing is a nascent technology and the next chapter in this technology is being written by Lynas everyday...

Current Performance... On Sept 30, 2015 LYC traded at $.32 and it's recent close is ~$2.00. That's a pretty good gain for whoever was lucky enough to pick the low (For the books, the gain was $1.68 or ~600% in a 2 1/2 year period)... The stock is trading near it's high and shares have nearly doubled over the past year...

IP and Experience... Think of the intellectual property and experience gained by operating LAMP and Mt. Weld. While I generally discount goodwill on a balance sheet, IMO Lynas is vastly undervalued because the IP and experience are seldom included in any such analysis. These are the intangibles that create much disagreement on the valuation and IMO it comes down to vision...

Current Market... One of the most important considerations may be the current market conditions. The world did make a correction when the overvalued US markets plunged. IMO, at some point world economies will realize that the US is creating it's own market problems and will decouple the lockstep trading that has hindered international markets lately. In any event the world markets overall are in great shape which should be beneficial to Lynas...


At the end of the day, it is difficult to put an analytical valuation on Lynas as that valuation is subjective, depending on the analyst. It is a good exercise to run numbers but as we all know, actual valuations are determined by the markets.  Bottom line, the excellent metrics and underlying story could make Lynas a favorite investment for fundamental analysis traditionalists. The key metrics and intangibles are in place and best of all it is still undiscovered... JMHO...