By Gustav AnderssonIn today’s world, we hear a lot about AI, advanced computers, and space travel. But we often forget about the basic materials that make all these things possible. As we use more technology, we need more of these raw materials.
Think about your phone. It contains more than 30 different materials, including rare metals most people don’t know about. And what about the big computer centers that run AI? They need lots of energy, but also lots of metals like copper and aluminum.
A World Bank report called “Minerals for Climate Action” shows how important these materials are for clean energy. For example:
- An electric car needs six times more minerals than a regular car.
- A wind power plant needs nine times more minerals than a gas power plant.
Source:
As we move towards cleaner energy and more advanced tech, we need more of these materials.
It’s not just about needing more materials. We also need more complex and special types of materials. For instance, we’ll need a lot more lithium for batteries as more people buy electric cars and we use more wind and solar power.
This growing need for materials creates challenges but also opportunities for companies that produce these raw materials. Companies that can grow, change, and come up with new ideas are likely to do well.
In this article, we’ll look at the top companies in this field. We’ll see how they’re preparing to meet the needs of our changing world.
The TL;DR (Too Long; Didn’t Read):
- Top 10 raw materials companies show strong financial performance:
- All have positive ROE and ROA, beating sector averages
- Revenue growth varies (-10.48% to 147.1%)
- 7/10 exceed average EPS growth (14.51%)
- 8/10 have PE ratios below sector average (21.19)
- Analyst upside expectations vary (0% to 187.5%)
- Some grow earnings despite low revenue growth
- Diverse sectors: chemicals, mining, specialty materials
- Mix of high-growth and high-profitability companies
- Well-positioned for tech and sustainable energy demand
- Key standouts: DRDGOLD (profitability), SilverCrest (growth), Lithium Americas (future prospects)
Metholodgy:
To determine the top growth stocks, we looked at a dataset with various financial metrics, including revenue growth, EPS growth, ROE, ROA, PE ratio, forward PE, and analyst upside. We used the Z-score method to give each metric a score based on how it compared to the average of all the companies in the Materials sector
Think of the Z-score as a way to see how well a company is doing compared to its competitors. It tells us how far above or below the average a company’s metric is, in terms of standard deviations. A positive Z-score means the company is performing better than average, while a negative Z-score means it’s below average.
For example, if a company’s revenue growth has a Z-score of 1.5, it means that the company’s revenue growth is 1.5 standard deviations above the mean of all the companies in the dataset. This suggests that the company is outperforming its peers in terms of revenue growth.
We calculated the Z-score for each financial metric and every company in the dataset. Then, we gave each company a score based on its Z-score, with higher scores going to companies with better performance compared to their competitors. Finally, we added up the scores for each metric to get a total score for each company.
Comment to the data:
I’ve chosen to split the data into separate tables for a clearer overview. This way, we’ll have one table showing the data points with their corresponding Z-scores, another table with the raw data, and a new table comparing the data to the sector averages. Here they are.
Above is the raw data for the Materials sector
This is the Z-score and the point system.
lastly we show the sector averages.
Top Companies Overview:
1. Celanese Corporation (CE) – Total Score: 5.933
- Revenue Growth: 7.11% (vs. sector average 35.25%)
- EPS Growth: 33.87% (vs. sector average 14.51%)
- ROE: 30.3% (vs. sector average -31.53%)
- ROA: 7.7% (vs. sector average -8.65%)
- PE Ratio: 7.42 (vs. sector average 21.19)
- Forward PE: 10.428 (vs. sector average 16.44)
- Analyst Upside: 19.08% (vs. sector average 106.81%)
Celanese shows strong profitability metrics and EPS growth, significantly outperforming sector averages. Its low PE and forward PE ratios suggest it might be undervalued. While revenue growth is below average, the company’s ability to grow earnings faster than revenue indicates strong operational efficiency.
- DRDGOLD Limited (DRD) – Total Score: 5.671
- Revenue Growth: 8.87% (vs. sector average 35.25%)
- EPS Growth: 12.4% (vs. sector average 14.51%)
- ROE: 214.87% (vs. sector average -31.53%)
- ROA: 163.21% (vs. sector average -8.65%)
- PE Ratio: 10.63 (vs. sector average 21.19)
- Forward PE: 10.214 (vs. sector average 16.44)
- Analyst Upside: 80.02% (vs. sector average 106.81%)
DRDGOLD stands out with exceptional ROE and ROA, far surpassing sector averages. While its revenue and EPS growth are modest, its profitability metrics are impressive. The company’s attractive valuation ratios and high analyst upside suggest potential for future growth.
- Oil-Dri Corporation of America (ODC) – Total Score: 5.634
- Revenue Growth: 8.15% (vs. sector average 35.25%)
- EPS Growth: 74.47% (vs. sector average 14.51%)
- ROE: 22.5% (vs. sector average -31.53%)
- ROA: 14.4% (vs. sector average -8.65%)
- PE Ratio: 11.03 (vs. sector average 21.19)
- Forward PE: 0.0 (data not available)
- Analyst Upside: 0.0% (data not available)
Oil-Dri Corporation shows strong EPS growth and solid profitability metrics. Its PE ratio is attractive compared to the sector average. The lack of forward PE and analyst upside data limits our analysis of future expectations, but current performance is strong.
- Lithium Americas (Argentina) Corp. (LAAC) – Total Score: 5.143
- Revenue Growth: 0.0% (vs. sector average 35.25%)
- EPS Growth: 0.0% (vs. sector average 14.51%)
- ROE: 123.8% (vs. sector average -31.53%)
- ROA: 100.7% (vs. sector average -8.65%)
- PE Ratio: 24.62 (vs. sector average 21.19)
- Forward PE: 4.954 (vs. sector average 16.44)
- Analyst Upside: 187.5% (vs. sector average 106.81%)
Lithium Americas shows no current revenue or EPS growth but exceptionally high ROE and ROA. Its current PE is above average, but the low forward PE suggests expectations of significant future earnings growth. The high analyst upside aligns with this optimistic outlook.
- SilverCrest Metals Inc. (SILV) – Total Score: 5.05
- Revenue Growth: 147.1% (vs. sector average 35.25%)
- EPS Growth: 86.67% (vs. sector average 14.51%)
- ROE: 32.0% (vs. sector average -31.53%)
- ROA: 28.9% (vs. sector average -8.65%)
- PE Ratio: 9.7 (vs. sector average 21.19)
- Forward PE: 17.975 (vs. sector average 16.44)
- Analyst Upside: 15.58% (vs. sector average 106.81%)
SilverCrest Metals demonstrates exceptional revenue and EPS growth, far surpassing sector averages. Its profitability metrics are strong, and its current PE ratio is attractive. The higher forward PE suggests expectations of continued strong performance.
6. Eagle Materials Inc. (EXP) – Total Score: 4.986
- Revenue Growth: 5.18% (vs. sector average 35.25%)
- EPS Growth: 9.23% (vs. sector average 14.51%)
- ROE: 36.8% (vs. sector average -31.53%)
- ROA: 16.4% (vs. sector average -8.65%)
- PE Ratio: 15.98 (vs. sector average 21.19)
- Forward PE: 13.837 (vs. sector average 16.44)
- Analyst Upside: 28.61% (vs. sector average 106.81%)
Eagle Materials shows strong profitability with ROE and ROA significantly above sector averages. While its revenue and EPS growth are below average, its valuation metrics are favorable, suggesting it might be undervalued compared to peers.
- Koppers Holdings Inc. (KOP) – Total Score: 4.39
- Revenue Growth: 5.1% (vs. sector average 35.25%)
- EPS Growth: 7.55% (vs. sector average 14.51%)
- ROE: 15.9% (vs. sector average -31.53%)
- ROA: 4.2% (vs. sector average -8.65%)
- PE Ratio: 10.39 (vs. sector average 21.19)
- Forward PE: 8.037 (vs. sector average 16.44)
- Analyst Upside: 54.1% (vs. sector average 106.81%)
Koppers Holdings demonstrates positive profitability metrics, albeit lower than some top peers. Its low PE and forward PE ratios suggest it might be undervalued, and analysts see significant upside potential.
- Cabot Corporation (CBT) – Total Score: 4.262
- Revenue Growth: -8.19% (vs. sector average 35.25%)
- EPS Growth: 42.24% (vs. sector average 14.51%)
- ROE: 35.4% (vs. sector average -31.53%)
- ROA: 12.6% (vs. sector average -8.65%)
- PE Ratio: 11.66 (vs. sector average 21.19)
- Forward PE: 12.439 (vs. sector average 16.44)
- Analyst Upside: 4.47% (vs. sector average 106.81%)
Despite negative revenue growth, Cabot shows strong EPS growth and profitability metrics. Its valuation ratios are attractive, but analysts see limited near-term upside.
- NewMarket Corporation (NEU) – Total Score: 4.109
- Revenue Growth: -4.02% (vs. sector average 35.25%)
- EPS Growth: 29.45% (vs. sector average 14.51%)
- ROE: 39.0% (vs. sector average -31.53%)
- ROA: 15.8% (vs. sector average -8.65%)
- PE Ratio: 12.4 (vs. sector average 21.19)
- Forward PE: 0.0 (data not available)
- Analyst Upside: 0.0% (data not available)
NewMarket shows strong profitability and EPS growth despite negative revenue growth. Its low PE ratio suggests potential undervaluation, but the lack of forward PE and analyst upside data limits our analysis of future expectations.
- REX American Resources Corporation (REX) – Total Score: 3.665
- Revenue Growth: -10.48% (vs. sector average 35.25%)
- EPS Growth: 137.34% (vs. sector average 14.51%)
- ROE: 13.2% (vs. sector average -31.53%)
- ROA: 10.3% (vs. sector average -8.65%)
- PE Ratio: 12.16 (vs. sector average 21.19)
- Forward PE: 28.926 (vs. sector average 16.44)
- Analyst Upside: 42.58% (vs. sector average 106.81%)
REX American Resources stands out with exceptional EPS growth despite negative revenue growth. Its profitability metrics are positive but lower than some peers. The high forward PE suggests expectations of continued strong earnings growth.
Lets compare top10 Material sector stocks.
- Profitability:
- All 10 companies show positive ROE and ROA, significantly outperforming sector averages.
- Standout performers: DRDGOLD (214.87% ROE, 163.21% ROA) and Lithium Americas (123.8% ROE, 100.7% ROA).
- Most companies maintain double-digit ROE and ROA, indicating efficient use of shareholder equity and assets.
- Growth:
- Revenue Growth: Ranges from -10.48% (REX) to 147.1% (SilverCrest), with 6 out of 10 companies below the sector average of 35.25%.
- EPS Growth: Ranges from 0% (Lithium Americas) to 137.34% (REX), with 7 out of 10 companies above the sector average of 14.51%.
- Several companies show strong EPS growth despite low or negative revenue growth, indicating effective cost management.
- Valuation:
- PE Ratios: 8 out of 10 companies have PE ratios below the sector average of 21.19, suggesting potential undervaluation.
- Forward PE: Varies widely, from 4.954 (Lithium Americas) to 28.926 (REX), reflecting different future earnings expectations.
- Analyst Expectations:
- Analyst Upside ranges from 0% (Oil-Dri, NewMarket – data unavailable) to 187.5% (Lithium Americas).
- 7 out of 8 companies with available data show lower analyst upside than the sector average of 106.81%.
- Operational Efficiency:
- Several companies (e.g., Celanese, Cabot, NewMarket) demonstrate ability to grow earnings despite low or negative revenue growth.
- Industry Diversity:
- Companies represent various sub-sectors: chemicals, metals & mining, specialty chemicals, and building materials.
- Growth vs. Stability:
- Some companies (like SilverCrest) show high growth but lower profitability, while others (like DRDGOLD) show exceptional profitability with modest growth.
- Future Prospects:
- Companies like Lithium Americas and REX show high forward PEs and analyst upsides, suggesting expectations of strong future performance. Overall, these top 10 companies in the raw materials sector demonstrate strong financial management and efficiency, often outperforming sector averages significantly in profitability metrics. While growth rates vary, many show the ability to increase earnings even in challenging revenue environments. The generally favorable valuations suggest potential opportunities, especially if these companies can capitalize on increasing demand for raw materials in technology and sustainable energy applications.
BLOG Comments:
The top 10 raw materials companies showcase a diverse performance landscape. Profitability is a clear strength, with all firms outperforming sector averages in ROE and ROA, particularly DRDGOLD and Lithium Americas. Growth patterns vary dramatically, from negative revenue growth to SilverCrest’s 147.1% increase, yet 7 out of 10 companies exceed the sector’s average EPS growth. This points to effective cost management across the board. Valuation metrics are generally favorable, with 8 out of 10 companies trading below the sector’s average PE ratio, potentially signaling undervaluation. Analyst expectations span a wide range, from minimal upside to Lithium Americas’ projected 187.5% growth. Notably, several companies demonstrate the ability to grow earnings despite revenue challenges, highlighting operational efficiency. The group’s diversity across chemicals, mining, and specialty materials sectors, combined with a mix of high-growth and high-profitability profiles, positions these companies well to capitalize on increasing demand in technology and sustainable energy applications.
Disclaimer
Readers should keep in mind that this analysis is based on historical financial data and should not be considered as investment advice. It is essential for readers to conduct their own thorough research and consult with financial professionals before making any investment decisions. The information provided in this article is for educational and informational purposes only and should not be relied upon as a sole basis for investment choices.