Most rare earths dug up in China are shipped to manufacturers based in China, including factories run by multinationals. But the export business is growing and got a boost this week when the World Trade Organization upheld a previous decision by saying China violated its rules by imposing export limits in 2009.
"We rate MOLYCORP INC (MCP) a SELL. This is driven by several 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 unimpressive growth in net income, 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:
- 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 120.8% when compared to the same quarter one year ago, falling from -$38.97 million to -$86.06 million.
- Net operating cash flow has decreased to -$45.79 million or 25.00% 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 1.10 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 2.06, which demonstrates the ability to cover short-term cash 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 71.99%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48.14% 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. 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