Analyst Avinash Kant believes the mining company is "uniquely positioned" to become a "dominant low-cost supplier of critical rare earth materials." As one of the few rare earth material suppliers outside of China, Kant believes the Colorado-based company has room for growth as companies look for suppliers outside the country's export quota and wildly varying prices. The analyst expects Molycorp to "benefit significantly" from the trend of companies seeking out rare earth material sources outside China over the next four to five years.
Rare earth materials are used in many electronics including semiconductors, hybrid and electric cars, and wind turbines. Demand for the materials are expected to increase at 1 9% compound annual growth rate through 2016, according to Kant.
TheStreet Ratings team rates MOLYCORP INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:
"We rate MOLYCORP INC (MCP) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 270.2% when compared to the same quarter one year ago, falling from -$18.89 million to -$69.93 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, MOLYCORP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$15.97 million or 192.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.06 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MCP's quick ratio is somewhat strong at 1.30, demonstrating the ability to handle short-term liquidity needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 50.31%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 127.77% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: MCP Ratings Report