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Basic Materials Stocks, Including International Paper, Making Big Moves Today
It's been a bad day for the market after the morning's trading. The Nasdaq has fallen 0.3%; the S&P 500 has slipped 0.4%; and the Dow has declined 0.5%. 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 0.8%, and its current biggest movers are:
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Schnitzer Steel Industries (Nasdaq:SCHN) is trading at $29.33 per share, down 9.5%. So far today, the company's volume is 370,676 shares, 0.8 times the average volume over the last three months. 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. SCHN has a debt-equity ratio of 33%, which is on the low side. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Slipping 4.4%, Cliffs Natural Resources (NYSE:CLF) is currently trading at $42.94 per share. So far today, 1.5 million shares have changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. CLF has a PEG ratio of 0.61. 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.
Cabot (NYSE:CBT) has decreased to $35.89 per share, a 3.7% fall. So far today, the company's volume is 166,028 shares, in keeping with its current daily average. Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made a strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move. 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/book value ratio is one of the more common methods of determining whether a stock is fairly valued. CBT has a P/B ratio of 1.29 which 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 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
Carpenter (NYSE:CRS) is currently trading at a share price of $49.25, a 3.4% decline. The company is trading at a volume of 63,899 shares. At this rate, trading activity will likely be down from yesterday when 240,683 shares changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. CRS has a low dividend yield of 1.4%. If you are an income investor, this stock may not be attractive to you. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Guide To Stock-Picking Strategies: Income Investing
Mueller Industries (NYSE:MLI) has fallen 3.3% and is currently trading at $43.43 per share. With 42,970 shares changing hands so far today, the company's volume is 0.3 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. MLI has a low P/S ratio of 0.72. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. 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.
Currently trading at $44.06 per share, Quaker (NYSE:KWR) has fallen 3.2%. The company's volume for the day so far is 10,669 shares. The trading volume for a stock indicates the level of investor interest. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. KWR's debt ratio of 48.9% 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Rising 2.9%, International (NYSE:IP) is currently trading at $33.86 per share. So far today, the company's volume is three million shares, 0.9 times its current daily average. Volume is an important indicator because it indicates how significant a price shift is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. IP's capitalization ratio of 65.4% is relatively high. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
The Basic Materials sector (XLB) is currently lagging behind the overall market, down 0.8%, and its current biggest movers are:
| Company | Market Cap | Percentage Change |
| Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) | $869 million | -9.5% |
| Cliffs Natural Resources (NYSE:CLF) | $6.4 billion | -4.4% |
| Cabot Corp (NYSE:CBT) | $2.36 billion | -3.7% |
| Carpenter Technology Corporation (NYSE:CRS) | $2.67 billion | -3.4% |
| Mueller Industries, Inc. (NYSE:MLI) | $1.72 billion | -3.3% |
| Quaker Chemical Corp (NYSE:KWR) | $592 million | -3.2% |
| International Paper (NYSE:IP) | $14.38 billion | +2.9% |
Schnitzer Steel Industries (Nasdaq:SCHN) is trading at $29.33 per share, down 9.5%. So far today, the company's volume is 370,676 shares, 0.8 times the average volume over the last three months. 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. SCHN has a debt-equity ratio of 33%, which is on the low side. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Slipping 4.4%, Cliffs Natural Resources (NYSE:CLF) is currently trading at $42.94 per share. So far today, 1.5 million shares have changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. CLF has a PEG ratio of 0.61. 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.
Cabot (NYSE:CBT) has decreased to $35.89 per share, a 3.7% fall. So far today, the company's volume is 166,028 shares, in keeping with its current daily average. Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made a strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move. 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/book value ratio is one of the more common methods of determining whether a stock is fairly valued. CBT has a P/B ratio of 1.29 which 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 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
Mueller Industries (NYSE:MLI) has fallen 3.3% and is currently trading at $43.43 per share. With 42,970 shares changing hands so far today, the company's volume is 0.3 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. MLI has a low P/S ratio of 0.72. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. 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.
Currently trading at $44.06 per share, Quaker (NYSE:KWR) has fallen 3.2%. The company's volume for the day so far is 10,669 shares. The trading volume for a stock indicates the level of investor interest. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. KWR's debt ratio of 48.9% 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Rising 2.9%, International (NYSE:IP) is currently trading at $33.86 per share. So far today, the company's volume is three million shares, 0.9 times its current daily average. Volume is an important indicator because it indicates how significant a price shift is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. IP's capitalization ratio of 65.4% is relatively high. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
by
Investopedia Staff
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