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Today's Dead Cat Bounce Stock Is Molycorp (MCP)

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.

Trade-Ideas LLC identified Molycorp ( MCP) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Molycorp as such a stock due to the following factors:

  • MCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.3 million.
  • MCP has traded 100,013 shares today.
  • MCP is up 4.9% today.
  • MCP was down 17.8% yesterday.

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More details on MCP:

Molycorp, Inc. produces and sells rare earths and rare metal materials in the United States and internationally. Currently there is 1 analyst that rates Molycorp a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Molycorp has been 4.2 million shares per day over the past 30 days. Molycorp has a market cap of $1.1 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.44 and a short float of 35% with 9.76 days to cover. Shares are down 34% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Molycorp as a sell. 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 ratings report include:

  • 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'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 34.46%, 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 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.

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