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Tickers in this Article: FUL, MEOH, TNH, AEM, CMP, MOS, ABX
The Nasdaq has moved up 0.2%, the S&P 500 is trading up 0.1% and the Dow has fallen 0.1% so far today. 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 biggest movers in the Basic Materials sector (XLB) (+0.1%) are:
CompanyMarket CapPercentage Change
HB Fuller Co (NYSE:FUL)$1.43 billion+8%
Methanex Corporation (USA) (Nasdaq:MEOH)$2.54 billion-5.1%
Terra Nitrogen Company, L.P. (NYSE:TNH)$3.78 billion+4.1%
Agnico-Eagle Mines Limited (USA) (NYSE:AEM)$7.2 billion-4%
Compass Minerals International, Inc. (NYSE:CMP)$2.31 billion+3.8%
Mosaic (NYSE:MOS)$21.74 billion+3.8%
Barrick Gold Corporation (USA) (NYSE:ABX)$38.26 billion-3.7%
Broker Summary: E-Trade Financial

Rising 8%, HB (NYSE:FUL) is currently trading at $31.03 per share. The company's volume is currently 363,760 shares for the day, 0.6 times the average volume over the last three months. In technical analysis, trading volume is used to determine the strength of a market indicator. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. The gross profit margin for FUL is 31.7%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. FUL's operating profit margin is 6.5%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. Net profit margin for the company is 5.7%.

When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. The P/B ratio for FUL is 2.13, indicating that the stock is trading for more 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. 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: How Buybacks Warps The Price-To-Book Ratio

Methanex Corporation (Nasdaq:MEOH) has decreased to $25.73 per share, a 5.1% fall. The company is currently trading a volume of 639,962 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. MEOH has a low gross profit margin of 19.6%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Compared with its gross profit margin, MEOH's operating profit margin of 8.9% and net profit margin of 7.1% are low.

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/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. MEOH's P/S ratio of 1.14 is on the high side. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

After an increase of 4.1%, Terra Nitrogen Company (NYSE:TNH) has reached a current price of $212.75. At 45,509 shares, the company's volume so far today is in keeping with its current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for TNH is 68.5%. TNH's operating margin of 63.1% and net margin of 63.9% are low relative to its gross margin.

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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. TNH's debt ratio of 14.8% is on the low side. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. However, one thing to note with this ratio: it isn't a pure measure of a company's debt (or indebtedness), as it also includes operational liabilities, such as accounts payable and taxes payable.

After a decline of 4%, Agnico-Eagle Mines Limited (NYSE:AEM) has hit a share price of $40.34. The company's volume is currently 963,529 shares. This is less trading activity than there was yesterday. Volume is an important indicator because it indicates how significant a price shift is. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. AEM's gross profit margin is 48.2%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. Relative to its gross profit margin, AEM's operating margin of 29% is on the low side. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. The company has a negative net profit margin of -28.4%. A negative net profit margin means the company spent more money than it made.

A company's value as an investment is more easily 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. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for AEM is 1.9%, which is on the low end. If you are an income investor, this stock may not be attractive to you. 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 currently trading at $72.37 per share, a 3.8% increase. At 127,464 shares, the company's volume so far today is 0.5 times its average over the past three months. A stock's volume conveys how excited investors are about it. 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. 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.

Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. CMP has a capitalization ratio of 40%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Mosaic (NYSE:MOS) has increased to a share price of $53.04, a 3.8% rise. This morning, the company is trading a volume of five million shares. Volume indicates the level of interest that investors have in a company at its current price. 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. MOS' gross profit margin is 33.5%. Operating margin for MOS is 18.9% and net margin is 18.6%, both low relative to its gross margin.

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 debt-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. MOS has a debt-equity ratio of 9%, which is on the low side. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Barrick Gold Corporation (NYSE:ABX) has fallen 3.7% and is currently trading at $36.84 per share. The company's volume is currently 4.2 million shares for the day, 0.4 times its current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. ABX has a gross profit margin of 62.7%. The operating profit margin indicates how much EBIT is generated per dollar of sales. Relative to its gross profit margin, ABX's operating margin of 42.3% is on the low side. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company's net profit margin is 30.6%.

Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). ABX has a P/E ratio of 8.4. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

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.

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