Valued at a market cap of $700 million, Neo Performance Materials (TSX:NEO) manufactures and sells rare earth materials, magnetic powders, magnets, and specialty metals globally through three segments: Magnequench, Chemicals & Oxides, and Rare Metals.
Neo produces bonded neodymium-iron-boron powders for automotive applications, as well as industrial materials for catalysts and electronics. Additionally, it supplies specialty metals such as tantalum and gallium for aerospace, medical, and technology applications.
Founded in 1994, Neo serves diverse industries including automotive, electronics, petroleum refining, and renewable energy across international markets.
Is the TSX stock a good buy right now?
Over the last 12 months, NEO stock has more than doubled, outperforming the broader market by a significant margin.
Despite a challenging macro environment, Neo Performance Materials delivered robust second-quarter results that exceeded expectations. A strong Q2 performance allowed company management to raise full-year EBITDA (earnings before interest, tax, depreciation, and amortization) guidance for the second time in 2025.
In Q2, the rare earth materials specialist reported adjusted EBITDA of $19 million, a 42% increase year-over-year, while first-half EBITDA totalled $36 million, up 50% from the prior year.
Revenue for the quarter reached $115 million, a 7% increase driven by higher volumes in the Magnequench segment and improved product mix in rare metals. The company’s adjusted EBITDA margin expanded by 400 basis points year-over-year to 16.5%, indicating operational improvements and a favourable product mix across all segments.
Future growth
Based on strong first-half performance and continued demand strength, Neo raised its full-year EBITDA guidance from $55–60 million to $64–68 million. CEO Rahim Suleman highlighted that NEO has moved “decisively from strategic review to focused execution” following a comprehensive evaluation that concluded accelerating NEO’s current strategy would maximize shareholder value.
The company’s European facility remains a key driver of future growth. This facility has already secured multiple commercial awards, including a new contract from a prominent European Tier 1 supplier for battery-powered traction motors, valued at $50 million in cumulative revenue. Phase 1A adds 2,000 tons of annual capacity, expanding to 5,000 tons in Phase 1B, with long-term targets of 20,000 tons annually.
Neo’s strategic positioning has garnered international recognition, with European Commission President Ursula von der Leyen showcasing the company’s “Made in Europe” magnet at the G7 Leaders Summit. Recent U.S. Department of Defense commitments to rare earth permanent magnet production underscore the growing strategic importance of localized supply chains.
All three business segments contributed to the strong performance. Magnequench achieved its highest quarterly EBITDA since 2022, with bonded magnet volumes up 36% and bonded powder volumes rising 30%.
The Chemicals & Oxides segment doubled its EBITDA year-over-year, benefiting from the new emissions catalyst facility and improved operational efficiency.
Rare Metals delivered $11 million in EBITDA despite normalized hafnium pricing, supported by strong gallium demand and geopolitical supply concerns.
With $80 million in cash, approximately $45 million in additional loan capacity, and access to $5 million in European government grants, Neo maintains financial flexibility to fund strategic initiatives while returning capital to shareholders through dividends and share repurchases.
Is the TSX stock still undervalued?
Analysts tracking NEO forecast revenue to rise from $475.9 million in 2024 to $816 million in 2029. In this period, adjusted earnings are forecast to expand from $0.05 per share to $1.12 per share.
If the TSX stock is priced at 20 times forward earnings, which is not too expensive, it will trade around $23 in early 2029, indicating an upside potential of over 45% from current levels. After adjusting for dividend reinvestments, cumulative returns could be closer to 55%.
