Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, rare earth producer Molycorp
With that in mind, let's take a closer look at Molycorp's business and see what CAPS investors are saying about the stock right now.
|Headquarters (Founded)||Greenwood Village, Colo. (2008)|
|Market Cap||$5 billion|
|Industry||Diversified metals and mining|
|Trailing-12-Month Revenue||$15.4 million|
CEO Mark Smith (since 2008)
CFO James Allen (since 2009)
|Trailing-12-Month Operating Margin||(327.2%)|
|Cash/Debt||$351.5 million / $5 million|
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 53% of the 293 members who have rated Molycorp believe the stock will underperform the S&P 500 going forward. These bears include All-Stars CAPSnGain and JakilaTheHun, both of whom are ranked in the top 10% of our community.
Just last week, CAPSnGain touched on Molycorp's seemingly unsustainable price action: "Although I'm generally bullish on Rare Earth development companies over the next 3-5 years, the recent hype around China's somewhat expected tightening of export quotas has brought the value of this company up too much too soon, in my opinion."
In fact, Molycorp is up 85% over the past month alone, easily outpacing other red-hot rare earth-related stocks like Rare Element Resources
CAPS All-Star JakilaTheHun helps break down the bear case:
Color me a tad bit skeptical that a company with a book value of about $5 and no positive cash flows could be worth $57. ...
The implied valuation of equity is about $4.7 billion and book value of assets is $449 million. Assuming that $1 cash is still "$1 cash", then this means that their mineral deposits must be greatly undervalued on a book value basis to reach the current share price. Basically, one would have to assume their $96 million in mineral assets (book value) are actually worth closer to $4.3 billion; or roughly 45 times the book value.
I'm not saying this is impossible, as my knowledge of the rare Earth metals industry is very limited. Rather, I'm suggesting that even given my lack of knowledge, this seems rather unlikely to me.
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