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Tickers in this Article: MCP, SA, OMG, ALB, PPO, GRA, MRC
The market is having a good day so far: the Nasdaq has increased 0.3%; the S&P 500 is trading up 0.1%; and the Dow is up 0.2%. The basic materials sector is the category of stocks that accounts for companies involved with the discovery, development and processing of raw materials. This sector includes the mining and refining of metals, chemical producers and forestry products. The basic materials sector is sensitive to changes in the business cycle. Because the sector supplies materials for construction, it depends on a strong economy. This sector is also sensitive to supply and demand fluctuations because the price of raw materials, such as gold or other metals, is largely demand driven.

The Basic Materials sector (XLB) is up 0.3%, underperforming the market overall. The biggest movers in the sector are currently:
CompanyMarket CapPercentage Change
Molycorp (NYSE:MCP)$1.33 billion+4.8%
Seabridge Gold, Inc (NYSE:SA)$771.7 million+3.9%
OM Group (NYSE:OMG)$618 million+3.4%
Albemarle (NYSE:ALB)$4.89 billion-3%
Polypore International (NYSE:PPO)$1.67 billion-2.7%
W.R (NYSE:GRA)$4.33 billion+2.7%
MRC Global (NYSE:MRC)$2.3 billion+2.7%
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Molycorp (NYSE:MCP) is at $12.66 per share after an increase of 4.8%. At 7.3 million shares, the company's volume so far today is 0.6 times the current three-month average. As a stock moves up or down, it is important to pay attention to the trading volume. This indicates the level of interest: the higher the volume, the more the interest. A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. The P/B ratio for MCP is 0.96 because the stock is trading for less than its book value. Industries that require more infrastructure capital (for each dollar of profit) will usually trade at P/B ratios much lower than those that don't. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Investment Valuation Ratios: Price/Book Value Ratio

Seabridge Gold, Inc (NYSE:SA) has moved up 3.9% and is currently trading at $18.46 per share. So far today, the company's volume is 194,936 shares. If a stock is trading on low volume, then there is not much interest in the stock. On the other hand, if a stock is trading on high volume, then there is a lot of interest in the stock. Valuation ratios include the price to earnings (P/E) ratio, the price to earnings growth (PEG) ratio, the price to sales (P/S) ratio, the price to book (P/B) ratio, and the dividend yield. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. SA has a low debt ratio of 4.9%. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

OM Group (NYSE:OMG) is currently trading at $19.73 per share, a 3.4% increase. So far today, the company's volume is 65,053 shares, 0.2 times the current daily average. The trading volume for a stock indicates the level of investor interest. Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. OMG has a P/S ratio of 0.35, on the low end. The lower the P/S ratio, the more reasonably price the stock, all else being equal. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

Albemarle (NYSE:ALB) is currently trading at a share price of $53.05, a 3% decline. So far today, 950,797 shares have changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. ALB's capitalization ratio is 30.3%. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.

Polypore International (NYSE:PPO) has decreased to $34.87 per share, a 2.7% fall. The company's volume is currently 125,507 shares for the day, 0.2 times its average over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The D/E ratio for PPO is 133%. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

W.R (NYSE:GRA) is up 2.7% to reach a current price of $59.28 per share. The company is trading at a volume of 250,034 shares. At this rate, trading activity will likely be down from yesterday when 1.5 million shares changed hands. Price change alone is not enough to know how a stock is doing. Volume is an important secondary indicator used to confirm trends suggested by price movement. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. GRA has a PEG ratio of 1.3. While P/E ratios are important indicators of market value, a high P/E in and of itself is not bad because it may indicate a company whose earnings are growing very rapidly, so many investors look at the PEG ratio in order to get an idea of whether or not a particular P/E ratio is justified by underlying earnings growth.

Rising 2.7%, MRC Global (NYSE:MRC) is currently trading at $23.25 per share. At 60,850 shares, the company's volume so far today is 0.6 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. While investment valuation ratios are useful tools in estimating the attractiveness of an investment, remember that it is important to look at a company's historical performance and compare the company ratios with its competitors and industry overall. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. MRC's P/B ratio of 2.11 shows that its share price is higher than its book value. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Using The Price-To-Book Ratio To Evaluate Companies

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

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