SEC Investigation Overshadows Better-Than-Expected 3Q Results For Molycorp

We last covered Molycorp, Inc. (MCP) at the end of August and advised investors to avoid the stock. Our stance on the company has not changed since then, but there is another reason to avoid the stock now.
A day after MCP surprised the market by posting better-than-expected results, the company told  investors that it is being investigated by the SEC for the accuracy of its public disclosures. The SEC requested information from the company on Aug. 28 in connection with a formal order of investigation pertaining to, among other things, the accuracy of the company's public disclosures.

MCP's financials are not very impressive. The company is trading at a forward P/E of 16 times. Despite its expected long-term growth rate of 20%, there is a lot of uncertainty regarding future sales. MCP's stock has gone down by more than 70% year to date. The stock is currently trading at ~$7. Read more