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Why Thompson Creek Metals (TC) is Popping on Tuesday

NEW YORK (TheStreet) -- Thompson Creek Metals  (TC) is popping during Tuesday's session following a Bank of America upgrade. By mid-morning, shares had gained 17.4% to $2.57.

Bank of America upgraded the miner to "buy" with a $7 price target compared to a previous "neutral" rating and $3 target.

The investment bank said its valuation was based on a mine-by-mine net asset value estimate and the likelihood the company will generate EBITDA greater than market cap over 2015.

However, the call is not without its risks.

"A protracted economic recovery or further European sovereign credit problems are the main risks to our TCM estimates and price objective, as these could prevent metal demand growth expected in 2014-15 and impact our commodity price forecasts. We also see execution risks at the Mt. Milligan development project with potential capital overruns due to a tight skilled labor market," wrote analysts in the report.

TheStreet Ratings team rates THOMPSON CREEK METALS CO INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate THOMPSON CREEK METALS CO INC (TC) a SELL. This is driven by a few notable weaknesses, 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 disappointing return on equity, generally disappointing historical performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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, THOMPSON CREEK METALS CO INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • TC's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 48.71%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • The gross profit margin for THOMPSON CREEK METALS CO INC is rather low; currently it is at 18.17%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.19% trails the industry average.
  • THOMPSON CREEK METALS CO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, THOMPSON CREEK METALS CO INC swung to a loss, reporting -$3.24 versus $1.68 in the prior year.
  • TC's debt-to-equity ratio of 0.75 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that TC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.10 is high and demonstrates strong liquidity.

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