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Basic Materials Stocks, Including Monsanto, Making Big Moves on August 23, 2012
It's been a bad day for the market after the morning's trading. The Nasdaq is trading down 0.2%; the S&P 500 has declined 0.4%; and the Dow has fallen 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 currently lagging behind the overall market, down 1%, and its current biggest movers are:
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Silver Standard Resources Inc (Nasdaq:SSRI) is at $14.84 per share after an increase of 5.9%. So far today, 1.3 million shares have changed hands. Volume indicates the level of interest that investors have in a company at its current price. 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. The P/S ratio for SSRI is a high 7.49. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
US Steel (NYSE:X) is down 4.4% to reach $21.76 per share. At 4.1 million shares, the company's volume so far today is 0.6 times its current three-month average. The trading volume for a stock indicates the level of investor interest. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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. X has a D/E ratio of 109%, which is relatively high. 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.
Currently trading at $39.99 per share, Cliffs Natural Resources (NYSE:CLF) has fallen 3.4%. The company's volume is currently 2.7 million shares. This is about the same trading activity as there was yesterday. 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 wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. 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. CLF's debt ratio is 58.6%. 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.
Randgold Resources Ltd (Nasdaq:GOLD) has risen 2.8% and is currently trading at $101.58 per share. The company's volume is currently 322,711 shares for the day, 0.9 times the current daily average. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. GOLD has a P/E ratio of 21.4. 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: How To Find P/E And PEG Ratios
Rising 2.5%, First Majestic (NYSE:AG) is currently trading at $19.63 per share. This morning, the company is trading a volume of 634,324 shares. Volume is an important indicator because it indicates how significant a price shift is. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. AG's stock is trading for more than its book value with a P/B ratio of 5.23. 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: Investment Valuation Ratios: Price/Book Value Ratio
Increasing 2.2%, Raven Industries (Nasdaq:RAVN) is trading at $29.61 per share. So far today, the company's volume is 93,373 shares, 0.6 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 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. 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. RAVN has a dividend yield of 2.9%. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Due Diligence On Dividends
After a decline of 2%, Monsanto (NYSE:MON) has hit a share price of $86.34. The company's volume for the day so far is 922,029 shares. At this rate, trading activity will likely be down from yesterday when 2.9 million shares changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. The P/S ratio for MON is 3.01, which is relatively high. This could be a good sign if the share price increases. 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. 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 1%, and its current biggest movers are:
| Company | Market Cap | Percentage Change |
| Silver Standard Resources Inc (Nasdaq:SSRI) | $1.13 billion | +5.9% |
| US Steel (NYSE:X) | $3.29 billion | -4.4% |
| Cliffs Natural Resources (NYSE:CLF) | $5.9 billion | -3.4% |
| Randgold Resources Ltd (Nasdaq:GOLD) | $9.08 billion | +2.8% |
| First Majestic (NYSE:AG) | $2.21 billion | +2.5% |
| Raven Industries (Nasdaq:RAVN) | $1.05 billion | +2.2% |
| Monsanto (NYSE:MON) | $46.93 billion | -2% |
Silver Standard Resources Inc (Nasdaq:SSRI) is at $14.84 per share after an increase of 5.9%. So far today, 1.3 million shares have changed hands. Volume indicates the level of interest that investors have in a company at its current price. 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. The P/S ratio for SSRI is a high 7.49. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
US Steel (NYSE:X) is down 4.4% to reach $21.76 per share. At 4.1 million shares, the company's volume so far today is 0.6 times its current three-month average. The trading volume for a stock indicates the level of investor interest. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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. X has a D/E ratio of 109%, which is relatively high. 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.
Currently trading at $39.99 per share, Cliffs Natural Resources (NYSE:CLF) has fallen 3.4%. The company's volume is currently 2.7 million shares. This is about the same trading activity as there was yesterday. 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 wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. 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. CLF's debt ratio is 58.6%. 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.
Randgold Resources Ltd (Nasdaq:GOLD) has risen 2.8% and is currently trading at $101.58 per share. The company's volume is currently 322,711 shares for the day, 0.9 times the current daily average. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. GOLD has a P/E ratio of 21.4. 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: How To Find P/E And PEG Ratios
Rising 2.5%, First Majestic (NYSE:AG) is currently trading at $19.63 per share. This morning, the company is trading a volume of 634,324 shares. Volume is an important indicator because it indicates how significant a price shift is. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. AG's stock is trading for more than its book value with a P/B ratio of 5.23. 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: Investment Valuation Ratios: Price/Book Value Ratio
Increasing 2.2%, Raven Industries (Nasdaq:RAVN) is trading at $29.61 per share. So far today, the company's volume is 93,373 shares, 0.6 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 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. 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. RAVN has a dividend yield of 2.9%. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Due Diligence On Dividends
After a decline of 2%, Monsanto (NYSE:MON) has hit a share price of $86.34. The company's volume for the day so far is 922,029 shares. At this rate, trading activity will likely be down from yesterday when 2.9 million shares changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. The P/S ratio for MON is 3.01, which is relatively high. This could be a good sign if the share price increases. 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. 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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