On a bad day for the market, the Nasdaq is trading down 1.9%, the S&P 500 has declined 1.3% and the Dow has fallen 1.1%. 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 currently lagging behind the overall market, down 1.9%, and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|Syngenta AG (ADR) (NYSE:SYT)||$32.1 billion||-4.5%|
|Ashland Inc. (NYSE:ASH)||$5.44 billion||-4.3%|
|W.R. Grace & Co. (NYSE:GRA)||$3.95 billion||-4%|
|Terra Nitrogen Company, L.P. (NYSE:TNH)||$4.24 billion||-3.1%|
|BHP Billiton (NYSE:BHP)||$171.27 billion||-3%|
|Randgold Resources Ltd. (ADR) (Nasdaq:GOLD)||$7.89 billion||-2.8%|
|Monsanto (NYSE:MON)||$46.64 billion||-2.8%|
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Slipping 4.5%, Syngenta AG (NYSE:SYT) is currently trading at $64.80 per share. The company's volume for the day so far is 187,823 shares. This is 0.8 times its current daily average. Volume indicates the level of interest that investors have in a company at its current price. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. SYT's dividend yield is 2.5%. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Due Diligence On Dividends
Falling 4.3%, Ashland (NYSE:ASH) is currently at a share price of $66.34. The company's volume is currently 513,567 shares for the day, 0.8 times the average volume over the last three months. Volume is used to evaluate how meaningful the price movement of a stock is. 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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). ASH's PEG ratio is 2.67. 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.
At $50.77, W.R (NYSE:GRA) has slipped 4%. This morning, the company is trading a volume of 327,259 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. GRA's P/B ratio of 15.11 shows that its share price is higher than its book value. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Terra Nitrogen Company (NYSE:TNH) is down 3.1% to reach $221.89 per share. So far today, 23,888 shares have changed hands, above yesterday's volume of 17,372 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. P/E ratio for TNH is 14.8. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: The P/E Ratio: A Good Market-Timing Indicator
After a decline of 3%, BHP Billiton (NYSE:BHP) has hit a share price of $62.12. The company's volume for the morning is 2.3 million shares. This is 0.8 times the current daily average. A stock's volume conveys how excited investors are about it. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio is calculated by dividing total liabilities by total assets. BHP has a low debt ratio of 48.8%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Randgold Resources Ltd (Nasdaq:GOLD) is currently trading at a share price of $83.79, a 2.8% decline. At 331,196 shares, the company's volume so far today is 0.6 times its 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. GOLD has a low capitalization ratio of 0.1%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Monsanto (NYSE:MON) is trading at $85.09 per share, down 2.8%. The company is currently trading a volume of 1.8 million shares. The trading volume for a stock indicates the level of investor interest. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. Dividend yield measures the income that a stock will generate for an investor. MON has a dividend yield of 1.4%, which is fairly low. This may indicate that the company's stock is overpriced. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Dividend Yield For The Downturn
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.