<div id="readability-page-1"><div><h2>Why the new rare earths ETF matters for Sprott (TSX:SII)</h2> <p>Sprott (TSX:SII) is expanding its ETF lineup with the Sprott Rare Earths Ex-China ETF. This fund gives investors targeted exposure to rare earth companies outside China amid growing supply chain and security concerns.</p> <p>See our latest analysis for Sprott.</p> <p>The launch of the Rare Earths Ex-China ETF comes after a choppy stretch for the stock, with a 12.57% 7 day share price return decline and a 5.07% 30 day share price return. However, the year to date share price return of 28.38%, alongside a 1 year total shareholder return of 150.29%, points to strong longer term momentum.</p> <p>If this rare earths theme interests you, it could be worth scanning other critical materials names through a focused screener such as 32 best rare earth metal stocks</p> <p>After a strong 1 year total shareholder return and with shares trading about 13% below the CA$201.60 analyst price target, the key question is whether Sprott is still mispriced or if the market already reflects future growth.</p> <h2>Preferred P/E of 50x: Is it justified?</h2> <p>At a last close of CA$178.31, Sprott trades on a P/E of 50x, which indicates the market is placing a rich price on its current earnings compared to peers.</p> <p>The P/E ratio compares the share price with earnings per share. A higher figure usually reflects stronger recent growth or expectations for higher future profitability. For an asset manager like Sprott, which depends on fee income and investment performance, the P/E often captures the market’s view on how durable that earnings stream might be.</p> <p>Sprott has reported earnings growth of 36.6% over the past year and 17.4% per year over the past 5 years, with high quality earnings and faster recent growth than the broader Capital Markets industry. That kind of record may help explain why investors are willing to pay a premium multiple, even though current net profit margins are lower than last year and return on equity of 17.5% is below a 20% high bar.</p> <p>Compared with the Canadian Capital Markets industry average P/E of 9.9x and a peer average of 10.3x, Sprott’s 50x multiple is far higher. This indicates the stock is priced well above sector norms rather than in line with them.</p> <p>See what the numbers say about this price — find out in our valuation breakdown.</p> <p><strong>Result: Price-to-Earnings of 50x (OVERVALUED)</strong></p> <p>However, there are clear risks, including reliance on capital markets activity for fee income and the possibility that rare earths sentiment cools, which could limit inflows into new products.</p> <p>Find out about the key risks to this Sprott narrative.</p> <h2>Another view from the SWS DCF model</h2> <p>While the 50x P/E points to an expensive share price, the SWS DCF model goes even further. At CA$178.31, Sprott trades well above an estimated future cash flow value of CA$44.23, which also suggests the stock is overvalued. So what would need to change for that gap to close?</p> <p>Look into how the SWS DCF model arrives at its fair value.</p> <figure><img height="476" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/5df0eb40-97bc-4756-828e-a54a3b1decd3/chart/dcf/query-ZGF0ZT0yMDI2LTA0LTI2?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="746" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/5df0eb40-97bc-4756-828e-a54a3b1decd3/chart/dcf/query-ZGF0ZT0yMDI2LTA0LTI2"/><figcaption>SII Discounted Cash Flow as at Apr 2026</figcaption></figure><p>Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Sprott 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 6 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.</p> <h2>Next Steps</h2> <p>With such a mixed picture on valuation and sentiment, it makes sense to check the underlying data yourself and decide how comfortable you are with that trade off. To see how the upside and downside currently stack up, take a look at the 2 key rewards and 1 important warning sign</p> <h2>Looking for more investment ideas?</h2> <p>If you stop at just one stock, you could miss opportunities that fit your goals even better, so put a few minutes into scanning the wider market.</p> <ul> <li>Spot potential value opportunities early by checking out the 6 high quality undervalued stocks, which combine quality fundamentals with prices the market may be overlooking.</li> <li>Strengthen your income stream by reviewing the 6 dividend fortresses, which pair higher yields with a focus on staying power.</li> <li>Sleep a bit easier at night by focusing on the 9 resilient stocks with low risk scores, which score well on resilience and financial stability.</li> </ul> <p><em> This article by Simply Wall St is general in nature. <strong>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.</strong> 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.</em></p><div><h3><strong>New: </strong>Manage All Your Stock Portfolios in One Place</h3><p>We've created the <strong>ultimate portfolio companion</strong> for stock investors, <strong>and it's free.</strong></p><p>• Connect an unlimited number of Portfolios and see your total in one currency<br/>• Be alerted to new Warning Signs or Risks via email or mobile<br/>• Track the Fair Value of your stocks<br/></p><p>Try a Demo Portfolio for Free</p></div></div></div>

SETM

<p>Sprott (TSX:SII) has launched the Rare Earths Ex-China ETF, targeting rare earth companies outside China amid supply chain concerns. Despite a recent decline in share price, Sprott shows strong long-term momentum with a year-to-date return of 28.38%. However, it trades at a high P/E of 50x, indicating overvaluation compared to industry peers. The SWS DCF model suggests a fair value of CA$44.23, further supporting the overvaluation claim. Investors are advised to assess the risks and opportunities in the current market context.</p>

Assessing Sprott (TSX:SII) Valuation After Launch Of Rare Earths Ex China ETF