Will Heavy Expansion Costs Slow USAR's Growth Momentum?

USA Rare Earth, Inc. USAR is still in the early phases of commercialization and continues to incur losses as it scales its operations. Though the company started generating revenues following the acquisition of Less Common Metals, higher operating expenses related to expansion, acquisitions and workforce growth are pressuring its profitability.

USAR’s cost of product revenues was $13 million in the first half of 2026, exceeding total revenues of $11.5 million. In the same period, its selling, general and administrative expenses surged to $53.8 million from $13.3 million in the year-ago period owing to increasing legal and consulting costs, higher headcount, recruiting fees and other growth-related expenses. 

USAR’s research and development expenses climbed to $25 million compared with $4.3 million reported in the year-ago period due to higher employee-related and development costs. It posted a net loss attributable to USA Rare Earth of $77.3 million, or 37 cents per share, in the first half of 2026. 

However, USAR recently reached a significant milestone by commissioning Phase 1a of its commercial magnet production line at its Stillwater, OK, facility. The company has begun commercial production of sintered neodymium-iron-boron (NdFeB) permanent magnets.

While USA Rare Earth is making steady progress in expanding its operations, continued losses and cost pressures remain challenges. The company’s ability to balance growth investments with improving revenues and cost discipline is expected to benefit it in the quarters ahead.

USAR’s Peer Performance

Among its major peers, NioCorp Developments Ltd. NB is experiencing rising cost pressures. In the third quarter of fiscal 2026, Niocorp reported a significant year-over-year increase in operating expenses, primarily driven by spending related to the advancement of the Elk Creek Project. If these elevated costs persist, they could weigh on NioCorp’s margins and profitability.

Its another peer, Rio Tinto Group RIO, is gaining from rising copper production, driven by strong operational performance across its assets. However, weather-related disruptions in the first quarter of 2026 affected Rio Tinto’s bauxite volumes. In the first half of 2026, Rio Tinto's productivity program delivered $0.5 billion in unit cost improvements through higher production volumes, better labor productivity, tighter contractor management and disciplined discretionary spending.

USAR’s Price Performance, Valuation & Estimates

Shares of USAR have gained 13.2% in the past year compared with the industry’s growth of 36.2%.

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From a valuation standpoint, USAR is trading at a forward price-to-sales ratio of 8.2X compared with the industry’s average of 1.43X. USA Rare Earth has a Value Score of F.
 

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The Zacks Consensus Estimate for USAR’s 2026 earnings has decreased over the past 60 days.

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The company currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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