The Motley Fool

Why 5N Plus Shares Plummeted

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of specialty metal and chemical products producer 5N Plus (TSX: VNP) plunged 14% today after its quarterly results disappointed Bay Street.

So what: The stock has rallied sharply since April on signs of a rebound in global demand, but today’s Q2 results — EPS of $0.41 on a year-over-year revenue decline of 20% — are forcing Mr. Market to quickly sober up. Although demand does seem relatively healthy, 5N’s backlog, revenue, and margins remain heavily pressured by low underlying commodity prices, suggesting that the competitive environment is only getting more intense.

Now what: Given the uncertainty facing 5N, management will focus on what it can control to improve profitability. “[W]e continue to focus on improving efficiency and further reducing costs and working capital in an effort to strengthen margins and cash flow,” said President and CEO Jacques L’Ecuyer. “We are also making progress towards our stated objectives of increasing value-added opportunities, with the planned acquisition of AM&M and their unique technology for making metal powders, and increasing our business activities in Asia, with the announcement of our new production activities and partnership in Korea.” So while 5N remains just too volatile for average investors to consider, less risk-averse Fools might want to look into today’ pullback as a speculative short-term turnaround opportunity.

Canada has yielded its fair share of great companies. But unsuspecting Canadian investors could get ambushed by a glaring weakness in their portfolios. One basic investing principle holds the key to a rock-solid portfolio … and it starts with our neighbors to the south, America.

That’s why The Motley Fool has put together a Special FREE Report, “3 U.S. Stocks Every Canadian Should Own.” The funny thing is, these stocks might as well be Canadian … because you use them every day. Just click here now to receive a copy at no charge!

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Brian Pacampara does not own shares in any companies mentioned at this time.  The Motley Fool does not own shares of any companies mentioned at this time.       

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.