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Basic Materials Sector's Biggest Movers for July 3, 2012
The market is having a good day so far: the Nasdaq has increased 0.7%; the S&P 500 has climbed 0.7%; and the Dow is trading up 0.6%. 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 1.6%, outperforming the market overall. The biggest movers in the sector so far are:
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Schnitzer Steel Industries (Nasdaq:SCHN) is currently trading at $30.19 per share, a 6.5% increase. The company's volume is currently 206,225 shares. This is below yesterday's volume of 473,527 shares. 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. SCHN has a low gross profit margin of 11.2%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. Operating margin for SCHN is 2.5% and net margin is 1.9%, both low relative to its gross margin.
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. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). Relative to the industry P/E ratio of 10.93, SCHN's 9.1 is low. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After rising 5.2%, TPC Group (Nasdaq:TPCG) is currently trading at a share price of $38.28. The company's volume is currently 30,086 shares for the day, 0.3 times the average daily volume. The trading volume for a stock indicates the level of investor interest. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. TPCG has a low gross profit margin of 11.5%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. TPCG has an operating profit margin of 5.7% and a net profit margin of 1.5%, both low compared to its gross profit margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. TPCG's D/E ratio of 113% is on the high side. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
Haynes International (Nasdaq:HAYN) has moved up 4.3% and is currently trading at $53.02 per share. So far today, the company's volume is 23,916 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin ratios highlight companies that are worth further examination. HAYN has a low gross profit margin of 21.5%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Relative to its gross profit margin, HAYN's operating profit margin of 14.5% and net profit margin of 7.4% are low.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. The capitalizion ratio of 0.5% is on the low end. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. 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.
POSCO (NYSE:PKX) has risen 3.4% to hit a current price of $83.41 per share. With 54,708 shares changing hands so far today, the company's volume is 0.2 times the average volume over the last three months. If a stock price moves on high volume, this means that the change is a significant one. A company's investment value can be estimated using valuation ratios such as 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 price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PKX has a PEG ratio of 0.84. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After an increase of 3.4%, Agrium Inc (NYSE:AGU) has reached a current price of $91.79. So far today, 604,629 shares of the company's stock have changed hands. This is more trading activity than there was yesterday. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. AGU's gross profit margin is 29.7%. Compared with its gross profit margin, AGU's operating profit margin of 6.8% and net profit margin of 8.4% are low.
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. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. AGU has a P/B ratio of 2.19 which shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Rising 3.3%, Randgold Resources Ltd (Nasdaq:GOLD) is currently trading at $93.87 per share. So far today, the company's volume is 370,642 shares, 0.6 times the average daily volume. High volume indicates a lot of investor interest while low volume indicates the opposite. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. The gross profit margin for GOLD is 40.9%. GOLD has an operating profit margin of 42.4% and a net profit margin of 35%, both low compared to its gross profit margin.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The dividend yield is calculated by dividing a company's dividends per share by its stock price. GOLD has a dividend yield of 0.4%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. 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: Guide To Stock-Picking Strategies: Income Investing
Compass Minerals International (NYSE:CMP) is at $78.33 per share after an increase of 2.9%. This morning, the company is trading a volume of 56,938 shares. 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. Margin analysis is a great way to understand the profitability of companies. CMP has a gross profit margin of 34%. Relative to its gross profit margin, CMP's operating profit margin of 19.5% and net profit margin of 12.8% are low.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. The P/S ratio for CMP is 2.3, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
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. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.
The Basic Materials sector (XLB) is up 1.6%, outperforming the market overall. The biggest movers in the sector so far are:
| Company | Market Cap | Percentage Change |
| Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) | $759.9 million | +6.5% |
| TPC Group, Inc. (Nasdaq:TPCG) | $569.5 million | +5.2% |
| Haynes International, Inc. (Nasdaq:HAYN) | $624.6 million | +4.3% |
| POSCO (ADR) (NYSE:PKX) | $24.92 billion | +3.4% |
| Agrium Inc. (USA) (NYSE:AGU) | $14.03 billion | +3.4% |
| Randgold Resources Ltd. (ADR) (Nasdaq:GOLD) | $8.32 billion | +3.3% |
| Compass Minerals International, Inc. (NYSE:CMP) | $2.52 billion | +2.9% |
Schnitzer Steel Industries (Nasdaq:SCHN) is currently trading at $30.19 per share, a 6.5% increase. The company's volume is currently 206,225 shares. This is below yesterday's volume of 473,527 shares. 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. SCHN has a low gross profit margin of 11.2%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. Operating margin for SCHN is 2.5% and net margin is 1.9%, both low relative to its gross margin.
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. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). Relative to the industry P/E ratio of 10.93, SCHN's 9.1 is low. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After rising 5.2%, TPC Group (Nasdaq:TPCG) is currently trading at a share price of $38.28. The company's volume is currently 30,086 shares for the day, 0.3 times the average daily volume. The trading volume for a stock indicates the level of investor interest. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. TPCG has a low gross profit margin of 11.5%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. TPCG has an operating profit margin of 5.7% and a net profit margin of 1.5%, both low compared to its gross profit margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. TPCG's D/E ratio of 113% is on the high side. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
Haynes International (Nasdaq:HAYN) has moved up 4.3% and is currently trading at $53.02 per share. So far today, the company's volume is 23,916 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin ratios highlight companies that are worth further examination. HAYN has a low gross profit margin of 21.5%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Relative to its gross profit margin, HAYN's operating profit margin of 14.5% and net profit margin of 7.4% are low.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. The capitalizion ratio of 0.5% is on the low end. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. 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.
POSCO (NYSE:PKX) has risen 3.4% to hit a current price of $83.41 per share. With 54,708 shares changing hands so far today, the company's volume is 0.2 times the average volume over the last three months. If a stock price moves on high volume, this means that the change is a significant one. A company's investment value can be estimated using valuation ratios such as 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 price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PKX has a PEG ratio of 0.84. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After an increase of 3.4%, Agrium Inc (NYSE:AGU) has reached a current price of $91.79. So far today, 604,629 shares of the company's stock have changed hands. This is more trading activity than there was yesterday. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. AGU's gross profit margin is 29.7%. Compared with its gross profit margin, AGU's operating profit margin of 6.8% and net profit margin of 8.4% are low.
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. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. AGU has a P/B ratio of 2.19 which shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Rising 3.3%, Randgold Resources Ltd (Nasdaq:GOLD) is currently trading at $93.87 per share. So far today, the company's volume is 370,642 shares, 0.6 times the average daily volume. High volume indicates a lot of investor interest while low volume indicates the opposite. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. The gross profit margin for GOLD is 40.9%. GOLD has an operating profit margin of 42.4% and a net profit margin of 35%, both low compared to its gross profit margin.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The dividend yield is calculated by dividing a company's dividends per share by its stock price. GOLD has a dividend yield of 0.4%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. 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: Guide To Stock-Picking Strategies: Income Investing
Compass Minerals International (NYSE:CMP) is at $78.33 per share after an increase of 2.9%. This morning, the company is trading a volume of 56,938 shares. 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. Margin analysis is a great way to understand the profitability of companies. CMP has a gross profit margin of 34%. Relative to its gross profit margin, CMP's operating profit margin of 19.5% and net profit margin of 12.8% are low.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. The P/S ratio for CMP is 2.3, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
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. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.
by
Investopedia Staff
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