Below are two small-cap companies that have been extremely beaten down as of the most recent earnings season. This has lowered shares to prices that are great for buying in. These companies tripling in share price will happen sometime near the end of 2013 or early 2014 as the catalysts come into play and results get reported to the street. In the interim shares will continue to be volatile.
Thompson Creek Metals Company, Inc. (TC): This Company has seen better days. Shares are down over 60% over the past 52 weeks and are just pennies above their 52-week low. According to its most recent 10-Q it just completed an expansion at the Endako Mine increasing capacity by 77.4% to 55,000 tons per day. Thompson Creek officials said the costs associated with opening that expansion were the cause of the operating loss for the quarter. Thompson Creek is sitting on the M. Milligan project, which will put it into the gold and copper markets. Production at Mt. Milligan is supposed to commence in the fourth quarter of 2013. Until then, it estimates capital expenditures could total nearly $1 billion to get it going plus the remaining payments for the Endako expansion. It goes on to note that it currently only has access to about $733 million and needs to look to secure more funding from other sources or else it won't be able to get Mt. Milligan up and running.
For the most recent quarter revenue dropped 45.8% compared with the same quarter in 2011. This was due to lower volume and lower average selling prices. Unfortunately sales prices have continued to drop. As of the first quarter the average was $14.74 per pound. On Thompson Creek's website it currently lists molybdenum selling for $13.95 per pound. Cost per pound produced was $12.95 per pound. Granted some of that was related to additional costs, but at that price it's only making $1 per pound, and with selling prices dropping, Thompson Creek needs to work on lowering the cost per pound.
It is estimating that the Mt. Milligan mine will be able to produce 81 million pounds of copper and 194,000 ounces of gold for the 22 year life of the mine. If it is able to control costs and secure funding to get the mine open, it stands to have a huge revenue increase and will be an amazing growth play. So long as it stops selling of the gold stake in the mine. However, since we're still 7 quarters away, it is still too early in the game to be certain. A close eye needs to be kept on the development timeline and costs to make sure they both stay near to planned. The earnings call is scheduled for Tuesday. I'll definitely be listening, and probably listening to a few more before buying in, but I definitely am going to watch this one.
Universal Display Corp (PANL): Universal recently reported earnings that severely disappointed the street and sent shares plummeting. I think this was an overreaction and shares at current prices are at a great buy-in point. First up is the strong balance sheet with $338.6 million in cash and no dept. The stock itself however is very volatile with prices fluctuating between $20-$30 each quarter in 2011. During the conference call for the end of the first quarter of 2012 Universal reported an excellent market outlook for its products. There is a trend of Universal missing analysts' estimates one quarter and then beating them the next. The misses historically have been in the first and third quarters. In the call executives explain that Samsung license revenue is only paid in the second and fourth quarters. I think analysts are forgetting that with their estimates and straight line the $30 million evenly over all four quarters. This tells me that next quarter will be a positive surprise and should send shares higher. Don't trade based on this, this was meant to point out my thoughts for some of the extreme volatility. When it takes these drastic dips though, it is a great time to add to your position. Despite missing estimates for the quarter, Universal reaffirmed its annual revenue guidance of $90-$100 million. I think that the large amount of OLED products slated to be released in the latter half of this year represent a huge growth catalyst for Universal.