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 (USA) (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 on sale
Thompson Creek Metals Company Inc (USA) (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% 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% 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 Metals Company Inc (USA) (NYSE:TC)’s molybdenum production from all mines during the first quarter of 2013 was 7.7 million pounds, up 73.8% 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 (USA) (NYSE:TC)’ operations displayed higher production and sales volumes while still maintaining lower operating expenses. As a result, revenue fell only 4.3% to $108.7 million and profits dropped slightly from $1.1 million to $0.9 million.
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 because the company reported better than expected quarterly results. For the quarter ended March 31, 2013, Arch Coal Inc (NYSE:ACI) posted narrower losses on a sequential basis. Losses dropped to $70 million during the three months, down from $295.4 million in December quarter. This was despite revenue 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.