NEW YORK (TheStreet) -- After a solid 12% run-up in share price on Thursday, Molycorp (MCP - Get Report) has reversed direction during Friday's trading session. By market close, the rare earth mineral miner had shed 4.5% to $6.01.
A day earlier, the Colorado-based business was named DA Davidson's "Best Pick for 2014", an honor bestowed upon it due to its potential to become a prominent, low-cost rare earth supplier located outside of China. Rare earths are being increasingly used in semiconductors, electronic vehicles and wind energy technology.
DA Davidson gave the stock a "buy" rating, increasing its price target to $8 from $6.
TheStreet Ratings team rates MOLYCORP INC as a Sell with a ratings score of D. The team has this to say about their 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."
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