Molycorp (MCP): Today's Weak On High Volume Stock

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 weak on high relative volume 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 $10.6 million.
  • MCP has traded 866,021 shares today.
  • MCP is trading at 2.41 times the normal volume for the stock at this time of day.
  • MCP is trading at a new low 4.18% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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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, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for Molycorp has been 5.9 million shares per day over the past 30 days. Molycorp has a market cap of $477.3 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.57 and a short float of 38.1% with 11.25 days to cover. Shares are down 66.4% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Molycorp as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Metals & Mining industry average. The net income has decreased by 17.9% when compared to the same quarter one year ago, dropping from -$71.18 million to -$83.90 million.
  • Net operating cash flow has significantly decreased to -$72.46 million or 93.68% 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 gross profit margin for MOLYCORP INC is currently extremely low, coming in at 3.00%. Regardless of MCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MCP's net profit margin of -71.76% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio of 1.17 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 1.58, 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 68.09%, 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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