Thompson Creek Metals, Arch Coal, Moly Corp: Beaten To Pulp

Thompson Creek Metals, Arch Coal, Moly Corp: Beaten To Pulp

This could well be a season of corporate turnarounds. As U.S. equities continue to trend higher on better results and an improving economy, even laggards and beaten down stocks such as Thompson Creek Metals Company Inc (NYSE:TC), Arch Coal Inc (NYSE:ACI), and Molycorp Inc (NYSE:MCP) are now recovering. Is it worth considering putting your money in these stocks? Here is a closer look:


Thompson Creek Metals Company Inc (TC) Discount Per Share

Thompson Creek Metals Company Inc (NYSE:TC) is a diversified mining company which primarily deals in molybdenum, copper and gold. Over the last 12 months, the stock has lost 31 percent as financial performance deteriorated under the effect of depressed molybdenum prices.  The company’s finances were also crippled by increasing costs at its Mt. Milligan copper-gold mine which was initially expected to involve capital expenditure of $1 billion but has already run over $1.5 billion. On the positive side, the stock is attractively placed at a 54 percent discount to its book value of $8.3 per share.

A forward price earnings ratio of 4.1 and a debt equity ratio of 0.72 further add to its attractiveness. However, a more important factor is the rapidly improving financial and operational performance of the company. Thompson Creek’s molybdenum production from all mines during the first quarter of 2013 was 7.7 million pounds, up 73.8 percent from 4.4 million pounds in the same period last year. This sterling performance has been overshadowed by softer molybdenum prices in international markets but the latest set of numbers is still good. During the quarter, Thompson Creek Metals Company Inc (NYSE:TC)’s operations displayed higher production and sales volumes while still maintaining lower operating expenses. As a result, revenues fell only 4.3 percent to $108.7 million and profits dropped slightly from $1.1 million to $0.9 million.

ValueWalk’s November 2021 Hedge Fund Update: Rokos Capital’s Worst-Ever Loss

InvestWelcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More

Coal is another sector which has remained in doldrums for a while. Even though natural gas is still capturing market share from coal, Arch Coal Inc (NYSE:ACI) – which recently posted first quarter results – has managed to get positive rating from analysts. Goldman Sachs raised the stock from Sell to Neutral while Morgan Stanley also raised it from Underweight to Equalweight. This was made possible after the company reported better than expected quarterly results. For the quarter ended March 31, 2013, Arch Coal posted narrower losses on a sequential basis. Losses dropped to $70 million during the latest three months, down from $295.4 million in December quarter. This was despite revenues dropping during the aforesaid period. Following the upgrades, the stock has seen better quotes although a high debt equity ratio of 1.8 still remains a concern. The stock currently trades at multi-year lows and remains deeply discounted despite the fact that natural gas prices are gradually inching up, potentially opening the field for coal.

Ugly duckling turns black swan

Molycorp Inc (NYSE:MCP) is the perennial poster boy for rare earth enthusiasts, for good and bad reasons. The stock trades at a fraction of the lofty valuations seen in 2011 as the target markets of rare earth metals did not take off as initially thought. A traders’ favorite, the stock crossed $70 in 2011 but fell in single digits in the later part of 2012 and has remained in this range. On an annual basis, the stock is down 78 percent although it cannot be ascertained if this is the bottom. In the latest update, the company reported first quarter results which are better than what the markets were expecting. Since the company is in the process of ramping up production, sequential performance is a better indicator of performance and Molycorp seems to have delivered on this front. Its revenues gained 9 percent sequentially to $146.4 million during the quarter while a loss of $47.2 million was down substantially from $362.4 million. This is still a loss-making company but latest results could offer a tailwind to the stock.

These oversold stocks have a history of downward movement and better results could act as a major trigger for a reversal in this trend.

Updated on

No posts to display