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Tickers in this Article: MRC, ALB, UFS, PKX, CYT, EGO, MON
The market is having a bad day so far: the Nasdaq is trading down 0.2%; the S&P 500 has decreased 0.4%; and the Dow has slipped 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 down 0.8%, underperforming the market overall. The current biggest movers in the sector are:
CompanyMarket CapPercentage Change
MRC Global (NYSE:MRC)$2.26 billion-3.9%
Albemarle (NYSE:ALB)$5.27 billion-1.8%
Domtar Corp (NYSE:UFS)$3.12 billion-1.7%
POSCO (NYSE:PKX)$26.2 billion-1.6%
Cytec Industries (NYSE:CYT)$2.99 billion-1.5%
Eldorado Gold Corporation (NYSE:EGO)$8.95 billion+1.5%
Monsanto (NYSE:MON)$46.73 billion-1.4%
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Falling 3.9%, MRC Global (NYSE:MRC) is currently at a share price of $21.37. The company is currently trading a volume of 38,032 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. In making a decision about a potential or existing investment, valuation ratios are useful as a basis for seeing whether the stock price is too high, reasonable, or a bargain. 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. MRC has a high debt ratio of 68%. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Albemarle (NYSE:ALB) is down 1.8% to reach $57.82 per share. So far today, the company's volume is 269,159 shares, while it was 1.4 million shares yesterday. The trading volume for a stock indicates the level of investor interest. 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. 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. ALB's debt-equity ratio of 44% is on the low end. 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.

Domtar Corp (NYSE:UFS) has fallen 1.7% and is currently trading at $72.04 per share. So far today, 163,541 shares have changed hands. This is in keeping with the average volume over the past three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. UFS has a low capitalization ratio of 24.4%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.

Currently trading at $83.41 per share, POSCO (NYSE:PKX) has fallen 1.6%. So far today, the company's volume is 87,121 shares, in keeping with its current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. PKX has a low dividend yield of 1%. This could indicate that that the stock is overpriced or that future dividends might be higher. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Investment Valuation Ratios: Dividend Yield

After a decline of 1.5%, Cytec Industries (NYSE:CYT) has hit a share price of $63.92. So far today, the company's volume is 76,879 shares. 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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). CYT's PEG ratio of 1.53 is in line with the industry average. 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.

Eldorado Gold Corporation (NYSE:EGO) has increased to a share price of $12.74, a 1.5% rise. The company's volume is currently 1.5 million shares for the day, lighter than yesterday's volume of 5.5 million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. EGO's stock is trading for more than its book value with a P/B ratio of 1.54. 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: How Buybacks Warps The Price-To-Book Ratio

Monsanto (NYSE:MON) is currently trading at a share price of $86.49, a 1.4% decline. This morning, the company is trading a volume of 614,512 shares. This is 0.2 times the average volume over the last three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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). MON has a P/E ratio of 21.8, high compared to the industry average of 15.63. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: The P/E Ratio: A Good Market-Timing Indicator

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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