USA Rare Earth (USAR) is back in focus after being removed from several Russell value and small cap indexes, a shift that changes how some passive funds may hold or trade the stock.

Those index removals landed just after a tough June for USA Rare Earth, when the stock fell 23% on concerns about a large SEC registration, a lawsuit from MP Materials and China’s export-control blacklist. Even so, the latest share price of $19.35 follows a 36.75% year to date share price return and a 1 year total shareholder return of 101.35%, suggesting long term momentum has been strong despite recent pressure.

If this volatility has you looking across the sector, it could be a good moment to scan the wider rare earths space using the 31 best rare earth metal stocks.

After a sharp June pullback and a strong 12 month run, USA Rare Earth now sits at $19.35 with a wide gap to its published targets. The key question is whether most of the potential is already reflected, or if there is still meaningful upside implied by today’s valuation.

Most Popular Narrative: 5,763.6% Overvalued

According to the most followed narrative, USA Rare Earth’s fair value is $0.33 compared with the last close of $19.35, a sharp gap that frames a very cautious valuation stance.

USA Rare Earth (USAR) is trading higher in early Thursday action, up $1.13 per share, after announcing it has been selected by the U.S. Department of Energy to receive up to $19.3M in federal funding, pending final negotiations. The award comes through the DOE’s Critical Materials Innovation, Efficiency and Alternatives program and is aimed at advancing a pilot scale rare earth element (REE) separations project within the United States.

Want to see how a project backed by federal funding, fast revenue growth assumptions and future profit margins gets marked at such a low fair value? The narrative from RetiredbutWorking leans on aggressive top line expansion, a sharp swing into profitability, and specific margin targets to justify that figure. Curious which forecasted cash flows, discount rate inputs and terminal multiple combine to bring the valuation all the way down there? The full narrative lays out every step of that pricing logic.

Result: Fair Value of $0.33 (OVERVALUED)

However, USA Rare Earth’s narrative could be challenged if the DOE funding terms shift unfavorably or if the company’s projected profit margins prove difficult to reach at scale.

Another View: SWS DCF Model Points to Deep Undervaluation

The most followed USA Rare Earth narrative prices the stock at $0.33, implying it is very expensive at $19.35. In contrast, our DCF model estimates a future cash flow value of $89.54 per share, which is about 78% above the current price and framed as significantly undervalued.

With one approach pointing to extreme overvaluation and the SWS DCF model flagging a large gap on the upside, which set of assumptions do you think better fits how USA Rare Earth might actually perform over time?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out USA Rare Earth for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 41 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment clearly split on USA Rare Earth, now is a good time to review the data, weigh both concerns and potential rewards, and check the 3 key rewards and 3 important warning signs.

Looking for more investment ideas beyond USA Rare Earth?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.