Is EQ Resources (ASX:EQR) Fully Valued Following Its U.S. Tungsten JV Deal?

EQ Resources (ASX:EQR) has moved into the U.S. tungsten supply chain after agreeing to take a 10% stake in a joint venture that aims to restart the Springer processing plant in Nevada.

The Springer deal comes after a powerful run in EQ Resources’ shares, with an 11.7% 1-day return, a 30-day share price return of 38.7%, and a very large 1-year total shareholder return that points to strong momentum rather than a short-lived spike.

Spot emerging critical minerals momentum by comparing EQ Resources with our hand picked 27 best rare earth metal stocks that are also plugged into supply chains tied to defence and advanced manufacturing.

EQ Resources has a Springer foothold, rapid share price gains and fast growing revenue. Are you looking at a re-rated business, or a sentiment spike that the valuation section needs to pull apart?

Most Popular Narrative: 72% Overvalued

EQ Resources last closed at A$0.43, while the most followed narrative pegs fair value at A$0.25. As a result, the story centers on a stock price well ahead of that estimate and leans heavily on a tight tungsten market to justify it.

I think that with Tungsten prices having surged dramatically, and reports indicating a very large increase over the past 12 months, driven by increased restrictions. And on top of that the global tungsten market being valued at approximately US$16 billion, which is roughly 5% of the copper market, then you add in the demand required for defense & Technology, aerospace & electronics and Semiconductors & chips, coupled with the lack of new mines over the past 40 years, the valuation is very promising for the next 3, 5 or 10 years time.

See why 6 investors see EQ Resources as 72% overvalued.

Result: Fair Value of A$0.25 (OVERVALUED)

Still, EQ Resources’ story could be upset if tungsten prices soften, or if new non Chinese supply ramps faster than investors currently expect.

Find out about the key risks to this EQ Resources narrative.

Another View On EQ Resources' Value

There is a sharp contrast between that A$0.25 community fair value and our DCF estimate. The SWS DCF model calculates a future cash flow value of A$2.69 per share, which implies EQ Resources at A$0.43 trades at a steep discount. Which perspective do you think better aligns with the level of risk you are willing to take?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out EQ Resources 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 5 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

Sentiment on EQ Resources is mixed, with sharp share price moves and competing valuation stories pushing investors to pick a side quickly. If you want to ground that call in the underlying thesis rather than headlines alone, weigh up the 2 key rewards and 2 important warning signs.

Looking for more EQ Resources sized ideas?

If EQ Resources has you rethinking where the next opportunity might come from, do not stop at one ticker. Broaden your watchlist now with a few focused idea pools.

• Target potential mispricing by scanning companies that screen as 5 high quality undervalued stocks before momentum and fresh coverage catch up.
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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.

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