What happened

Shares of MP Materials (MP -1.11%), a miner of rare earth elements, are up 3.3% at 11:15 a.m. EDT Friday after crushing Q2 earnings estimates yesterday afternoon. That's the good news.

The bad news is that at one point this morning, MP shares were up as much as 12.5%, so it actually looks as if the enthusiasm over this rare earth metals stock is dying out fast. But...should it be?

Arrow angles up on a green stock chart

Image source: Getty Images.

So what

Heading into Q2, analysts had forecast that MP Materials would earn a $0.13-per-share profit on sales of $58.3 million. As it turned out, Q2 profits were $0.15 per share, and sales soared to $73.1 million.  

So far, so good -- and the news gets better.

Sales in the fiscal second quarter grew 141% year over year, and the company's $0.15-per-share profit -- an actual GAAP profit, by the way, not some cobbled-together pro forma profit -- reversed from last year's $0.92-per-share loss. MP Materials produced its "highest quarterly [rare earths oxide] output in Mountain Pass history," boasted CEO James Litinsky, and it's "making steady progress on our Stage II Optimization" and "on track to deliver our first full year of separated [neodymium-praseodymium, or NdPr] production in 2023."  

Now what

That's important, because NdPr itself would obviously sell for higher prices and therefore be more profitable than the unprocessed oxides of the component metals. Furthermore, MP says it is making progress in "Stage III" of its operations, in which it plans to "repatriate magnet manufacturing in the United States" so that the U.S. will no longer be dependent upon foreign supply of its rare earths -- and so that MP can capture the entire value chain from production of raw materials to producing finished products.

All that being said, one thing MP Materials did not say was how profitable it expects to be over the rest of this year -- or whether it has managed to turn free-cash-flow positive yet. There's a lot of work and a lot of investment still to be done -- and presumably a lot more money to be spent.

In that regard, it's worth noting that MP did not attach a cash flow statement to its earnings release, and so for the time being at least, investors remain unaware of precisely how free-cash-flow negative the company might currently be.