What happened

Shares of silicon metal maker Ferroglobe PLC (GSM -1.63%) are up 9.3% as of 11 a.m. EDT.

So what

Ferroglobe reported first-quarter 2017 sales of $388.2 million while markets were closed yesterday, down 6.6% versus last year's first quarter. On the plus side, the company's losses came to just $0.04 per share -- barely a quarter of the money it lost one year ago.

The sales number was about 1% higher and losses were less than half what Wall Street expected. Management credited a "significant margin improvement" for its ability to outperform expectations "despite a decrease in our shipments."

Stick figure explaining stock chart.

Now that Ferroglobe stock is up, what comes next? Image source: Getty Images.

Now what

Going forward, Ferroglobe says it will focus its efforts on generating cash and improving "liquidity." If these are its intentions, however, it's hard to see why investors are reacting so positively -- despite the "earnings beat."

Although Ferroglobe succeeded in generating positive operating cash flow in the first quarter, operating cash flow was only $1.2 million -- and down 96% from last year's first-quarter number. Even after cutting capital spending by more than half, this left Ferroglobe with negative free cash flow of $11.2 million for the quarter, which was four times worse than at this time last year.

Right now, Ferroglobe appears to be on course to post its third straight year of declining operating cash flow, while its free cash flow number has shrunk to $36 million generated over the past 12 months. For a company valued at $1.6 billion, that works out to a valuation of 44 times free cash flow -- quite a steep price for a metals maker.

I'm honestly not sure how much further investors think this stock can go up, but until Ferroglobe's cash picture starts improving, I fear that whatever they're hoping to see, they're wrong.