The market is doing well so far today. The Nasdaq is trading up 0.8%; the S&P 500 has risen 0.7%; and the Dow has increased 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.
Outperforming the market overall, the Basic Materials sector (XLB) is up 1.2% and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|Innophos Holdings, Inc. (Nasdaq:IPHS)||$1.24 billion||-10.2%|
|Rentech Nitrogen Partners LP (NYSE:RNF)||$1.16 billion||+5.2%|
|Sun Hydraulics Corporation (Nasdaq:SNHY)||$634.2 million||-4.3%|
|Georgia Gulf Corporation (NYSE:GGC)||$1.23 billion||+4.1%|
|Metals USA Holdings Corp (NYSE:MUSA)||$612.9 million||-3.7%|
|Parker-Hannifin (NYSE:PH)||$12.17 billion||+2.8%|
|Westlake Chemical Corporation (NYSE:WLK)||$4.54 billion||+2.4%|
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Innophos Holdings (Nasdaq:IPHS) is at a share price of $51.03 after a sharp decline of 10.2%. So far this morning, 518,126 shares have changed hands. This is seven times its current daily average. Volume indicates the level of interest that investors have in a company at its current price. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The dividend yield is calculated by dividing a company's dividends per share by its stock price. IPHS has a dividend yield of 1.9%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. SEE: Dividend Yield For The Downturn
After an increase of 5.2%, Rentech Nitrogen (NYSE:RNF) has reached a current price of $31.97. This morning, 241,652 shares have been traded, consistent with the volume from yesterday. Volume is used to evaluate how meaningful the price movement of a stock is. Valuation ratios like 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 are useful in determining how attractive a potential or existing investment is. 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. RNF has a debt ratio of 34.8%, which is fairly low. 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.
Currently trading at $23.42 per share, Sun (Nasdaq:SNHY) has fallen 4.3%. The company's volume for the day so far is 18,494 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. The P/E ratio for SNHY is 16.3, below the industry average of 27.73. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Investment Valuation Ratios: Price/Earnings Ratio
Georgia (NYSE:GGC) has moved up 4.1% and is currently trading at $37.49 per share. The company's volume is currently 295,212 shares for the day, 0.3 times its average over the past three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. GGC's P/B ratio of 2.43 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
Falling 3.7%, Metals USA (NYSE:MUSA) is currently at a share price of $15.92. So far today, the company's volume is 117,818 shares. This is in keeping with its current daily average. If a stock price moves on high volume, this means that the change is a significant one. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. MUSA has a P/S ratio of 0.29, on the low end. Low P/S ratios can indicate unrecognized value potential - so long as other criteria like high profit margins, low debt levels and growth prospects are in place. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
Parker-Hannifin (NYSE:PH) has increased to a share price of $82.81, a 2.8% rise. So far today, 443,797 shares have changed hands, while it was 1.8 million shares yesterday. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt ratio is calculated by dividing total liabilities by total assets. PH has a debt ratio of 56.2%. 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.
Rising 2.4%, Westlake (NYSE:WLK) is currently trading at $69.74 per share. The company is currently trading a volume of 182,213 shares. A stock's volume conveys how excited investors are about it. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. WLK has a debt-equity ratio of 39%, which is on the low side. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.