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Why Molycorp (MCP) Stock Hit a One-Year Low Today

Stocks in this article: MCP

NEW YORK (TheStreet) -- Molycorp  (MCP) plunged to a one-year low of $3.12 on Friday after J.P. Morgan  (JPM) downgraded the mining corporation to "underweight" from "neutral" in the wake of the company's first-quarter results that came up short of analysts' expectations.

Molycorp reported a loss of 29 cents a share, which was wider than the Capital IQ Consensus Estimate of a loss of 24 cents a share. Revenue declined 18.5% to $118.5 million, well short of analysts' expectations of $144.48.

The stock was down 14.82% to $3.16 at 11:35 a.m. More than 12.5 million shares had changed hands, well above the average volume of 4,461,100.

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Separately, TheStreet Ratings team rates MOLYCORP INC as a "sell" with a ratings score of D. TheStreet Ratings 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 weak operating cash flow, generally disappointing historical performance in the stock itself and generally high debt management risk."

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

  • Net operating cash flow has significantly decreased to -$64.34 million or 51.57% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, MOLYCORP INC has marginally lower results.
  • The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, MCP has managed to keep a strong quick ratio of 2.46, which demonstrates the ability to cover short-term cash needs.
  • MCP has underperformed the S&P 500 Index, declining 17.29% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Metals & Mining industry average, but is greater than that of the S&P 500. The net income increased by 50.3% when compared to the same quarter one year prior, rising from -$391.19 million to -$194.31 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength 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.
  • You can view the full analysis from the report here: MCP Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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