Mexco Energy Corp. (AMEX: MXC), a perennial $5 stock, closed above $42.50 today — roughly ten times its share price at the beginning of April and five times what it was trading for just days ago. Curiously, there were no specific reasons for the scorching appreciation in price aside from a dramatic shift in investor sentiment toward micro-cap oil and natural gas stocks (e.g. MXC, PDO, FPP) as well as a series of minor news releases regarding new oil and natural gas wells. In fact, the explosive rally was so unbelievable that it prompted the AMEX to halt trading of MXC around 11:05 EST on Monday, May 19th, and suspend Mexco for the remainder of the day. Apparently this regulatory skepticism did little to dissuade investors, however, as the stock went on to surge fifty percent for the third day in a row after trading resumed.

But how long can this continue? As a result of the run-up, Mexco Energy Corp. now has a market valuation of nearly $75 million despite the fact that it turned only $221,000 in profit last quarter, has a book value of merely $7 million (most of which is property), has only $220,000 in cash, and boasts only two full-time employees (see the latest quarterly report for details). Given the gross disconnect between the share price of MXC and its business fundamentals, it is now only a matter of time before Mexco comes crashing back to earth. The question is not if this will occur, but when. A severe correction is long overdue.