First, a caveat:

I believe that it is incumbent upon value investors to look past the ratios and truly understand the businesses we research, their current situation, and adjust what we see "at face value" with what we know about the reality.

For the record, I'm not suggesting wildly adopting an Adjusted GAAP view of financials... but I do believe there are scenarios that CLEARLY require adjusting GAAP numbers to get a true view of the business.

ELMT is currently such a stock.

TL/DR: ELMT is a US based, recently IPO'd industrial that is currently misunderstood because of messy reporting due to IPO and restructuring costs in order to IPO as they wanted. It isn't deep value, but it has an INCREDIBLY large moat in a critical industry, and is trading at an incredibly fair value after adjusting for the one-time impacts of restructure / IPO costs. Amazing business at fair value, and once the snowball starts rolling, it will roll. Great setup for a long-term compounder that feeds into many critical industries.

The Company

The Elmet Group (NASDAQ: ELMT) was founded on September 13, 2024 and is headquartered in Portland, ME (however, primary operating subsidiary, Elmet Technologies, dates back to 1929 as The American Electro Metals Corporation).

ELMT operates in two segments:

1. Critical Materials Components (CMC) — sole U.S.-owned, vertically integrated manufacturer of tungsten, molybdenum, and refractory alloys (TZM, HCT moly, heavy tungsten). Powder → press → sinter → form → machine, fully in-house. Customers are deep in the DoW (Department of War) supply chain: missiles, hypersonics, submarines, satellites, drone fragmentation, fission/fusion, semiconductor equipment, medical imaging.

(Personal note: as a veteran myself, I absolutely hate calling the DoD... DoW but it is what it is.)

1. Engineered Microwave Products (EMP) — high-power RF and microwave systems (50 MHz–40 GHz, up to 60 MW peak power) for radar, missile tracking, directed energy, fusion research, semiconductor processing.

The CMC division includes the only refractory metal 5,500-ton extrusion press in operating commercial use in the U.S. They have a spare in storage. The press alone is a meaningful moat — replicating the full manufacturing base is estimated >$1B per the S-1.

China currently controls ~80% of global tungsten supply and has been alternately imposing and lifting export restrictions since early 2025. ELMT is one of the only ways to play tungsten supply-chain reshoring in the public markets.

Recent developments and what the market is seeing

ELMT IPO'd on April 23rd, 2026 with an opening price of $14. It quickly ran up to $17 - $18 before selling off back down to below IPO levels.

ELMT reported earnings this morning before market open, and the headline numbers (the "face value" I mentioned above), was not good.

Headline: "ELMT swings to Q1 net loss". Stock -8.6% on the day as of this writing (10:50 am, on May 29th, 2026).

What actually happened, and adjustments required to see the truth

Reported Q1 2026 vs Q1 2025:

|Line|Q1 2026|Q1 2025| |:-|:-|:-| |Revenue|$56.0M|$46.4M (+20.7%)| |Gross margin|21.2%|18.6% (+260 bps)| |GAAP Net Income|$(0.3M)|$1.2M| |GAAP EPS|$(0.02)|0.06| |Adjusted EBITDA|$9.2M (16.4%)|$4.5M (9.6%) — +106%| |Adjusted Net Income|**$4.7M|$1.9M| |Adjusted EPS|$0.24|0.10|

The GAAP loss is driven by three non-economic line items:

• $4.7M income tax provision — almost entirely a one-time deferred tax remeasurement when ELMT converted from S-Corp to C-Corp on January 2, 2026 as part of the IPO reorganization. Pretax income was $4.4M and the effective rate showed up at >100%. * ~$4.75M of IPO/reorganization costs flowing through G&A (which spiked from $3.3M to $7.1M YoY). * These were partially offset by a $3.1M mark-to-market gain on options ELMT holds in tungsten supplier EQ Resources Limited.

Net all this out and operating margin was ~12%, not the headline 3.3%.

Adjusted balance sheet (post-IPO)

|Reported (Apr 3)|Adjusted| |:-|:-| |Cash|$1.8M| |Total debt|$50.4M| |Net debt|$48.6M| |Stockholders' equity|$61.0M| |Current ratio|1.75×|

The IPO closed April 24 for $125.5M net proceeds. ELMT used $17.8M to retire third-party term debt and $8.3M to settle SAR liabilities, leaving ~$99M in incremental cash. Net leverage went from 1.7× to net cash overnight. None of this shows up on the balance sheet for the quarter as they happened after the quarter closed.

Forward visibility

• Backlog: $74.7M (Q1 '25) → $96.3M (FY '25) → $113.3M (Q1 '26). +51.7% YoY. * Deferred revenue: $14.9M → $23.5M QoQ (+58%). Customers prepaying to help secure rare materials (tungsten and other rare-earths) to ensure supply. * TTM revenue: $211.2M (+4.8% vs FY25); Q1 alone was +20.7% YoY — meaningful acceleration as ADG (aerospace, defense, government) demand kicks in.

Backlog has now grown faster than revenue for several consecutive quarters, which historically precedes revenue acceleration in this business. Once the snowball gets rolling, it rolls.

Back of napkin valuation based on these reasonable adjustments at $15

• EV/Adj EBITDA (TTM): 13.3× * Forward Adj P/E: ~19.6× (adjusting for the new capital structure) * PEG: ~0.85 * P/B (pro forma): 2.55× * P/S (TTM): 2.13×

Defense small-cap comps are 15–18× EV/EBITDA. Critical minerals plays trade 20–25x (and recently, higher). ELMT splits both worlds and trades closer to the defense bucket. Apply 16× to TTM EBITDA + net cash and you get ~$17.50. Apply 20× to a reasonable forward EBITDA (assuming 15–20% growth on backlog conversion) and you get ~$22–25.

Bull case

. Irreplaceable moat. Only U.S.-owned vertically integrated tungsten/molybdenum producer. Embedded in ~100 DoW programs and >95 national lab programs (Fermi, Los Alamos, etc.). Switching costs are extreme. 2. Critical materials reshoring tailwind (national security & critical supply chain for businesses). China's export controls on tungsten/molybdenum into 2026–2027 directly benefit ELMT. PRC produces ~80% of global tungsten. 3. Operating leverage starting to show. Q1 gross margin +260bps, adjusted EBITDA +106% on +21% revenue. This is what early-stage operating leverage looks like. 4. Pristine balance sheet post-IPO. Net cash position. Management has signaled M&A intent. 5. Aerospace/defense spending cycle. PAC-3 production tripling, U.S. Patriot interceptor inventory at 25% of plan per Pentagon disclosures, NATO restocking. Hard to argue this isn't a multi-year tailwind. 6. Misunderstood right now. Newly public, sub-$500M market cap, no sell-side coverage at IPO (Cantor, Needham, Canaccord, Roth initiated mid-May at Overweight/Buy with ~$20 targets). Liquidity is thin. 7. Reduced dilution risk. Fortress balance sheet after incorporating the post-IPO adjustments (rare these days for newly IPO'd company) reduces risk of dilution to raise capital (but still likely dilution risk for stock based comp after IPO).

Bear case / risks

1. Customer concentration. One customer is ~18% of A/R and ~11% of Q1 revenue. Loss of a major program would hurt. 2. Material weaknesses in internal controls disclosed in the S-1. They're working on remediation but the risk is real for a newly public company. 3. Capex heavy. P/FCF is ugly because they're investing aggressively. If returns on that capex don't materialize, the multiple compresses. 4. Related-party debt of $15M wasn't paid down with IPO proceeds. Need clarity on terms. 5. Q2 2026 will print another GAAP loss due to the $8.3M SAR cash settlement plus likely $5–8M of additional non-cash SBC for equity-settled SARs vesting at IPO. The market may misread it again — or it could mean further pullback before the story clears. 6. Mark-to-market volatility. The EQ Resources options ($3.1M gain in Q1) are a real asset but lumpy; future quarters could swing the other way. 7. Variable rate debt. Most of the remaining term debt is variable rate (interest rate collars hedge a piece). 8. Tungsten price exposure. Most contracts are fixed-fee; raw material spikes hit margins, but EQ Resources does effectively hedge this risk. 9. Newly public, micro-cap volatility. This will move. 10. Not a Graham-style bargain. 27× TTM P/E and 2.5× P/B aren't deep value. The thesis depends entirely on the forward growth being real and the multiple holding or expanding. I would argue this is a Buffett style Moat + Fair Value play, mixed with a Lynch style PEG + Strong Balance Sheet play.

Position / disclosure

I own 460 shares with an average cost of $15.76. Will average down more if given opportunity (missed my chance to get into the $14s because I was writing this... haha).

Sources

• ELMT Q1 2026 Form 10-Q (filed May 29, 2026) * LMT Q1 2026 earnings press release (May 29, 2026) * ELMT S-1/A Amendment No. 1 (April 14, 2026) * ELMT 424b4 final prospectus (April 23, 2026)