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Basic Materials Stocks, Including Sasol Limited, Making Big Moves on September 12, 2012
The market has been doing well after the morning's trading. The Nasdaq is up 0.1%; the S&P 500 has climbed 0.3%; and the Dow has moved up 0.4%. 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.
Underperforming the market overall, the Basic Materials sector (XLB) is up 0.1%, and these are its current biggest movers:
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American (NYSE:AVD) is at $32.17 per share after an increase of 3.1%. The company's volume for the day so far is 81,978 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). AVD has a PEG ratio of 1.25. 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.
Weyerhaeuser (NYSE:WY) is currently trading at $26.54 per share, a 2.7% increase. So far today, the company's volume is 2.3 million shares, in keeping with its current three-month average. Price change alone is not enough to know how a stock is doing. Volume is an important secondary indicator used to confirm trends suggested by price movement. 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 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 WY is a high 1.86. 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.
CF Industries (NYSE:CF) is up 2.6% to reach a current price of $216.74 per share. The company's volume is currently 547,855 shares. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CF has a low capitalization ratio of 24.2%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Cliffs Natural Resources (NYSE:CLF) is currently trading at a share price of $40.63, a 2.5% decline. At 5.6 million shares, the company's volume so far today is consistent 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. 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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for CLF is 0.92 because the stock is trading for less than its book value. This could mean that either the market believes the asset value is overstated, or the company is earning a very poor (even negative) 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: How Buybacks Warps The Price-To-Book Ratio
At $45.36, Sasol Limited (NYSE:SSL) has slipped 2.3%. The company is currently trading a volume of 131,008 shares. Volume is an important indicator because it indicates how significant a price shift is. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. SSL's dividend yield is 3.1%. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Investment Valuation Ratios: Dividend Yield
After an increase of 2.2%, Agrium Inc (NYSE:AGU) has reached a current price of $103.82. The company's volume is currently 694,092 shares for the day, 0.7 times its average over the past 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. 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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. The P/E ratio for AGU is 10.7, above the industry average of 9.53. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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: Can Investors Trust the P/E Ratio?
Terra Nitrogen Company (NYSE:TNH) has increased to a share price of $214.79, a 2.1% rise. So far today, the company's volume is 9,097 shares. At this rate, trading activity will likely be down from yesterday when 22,863 shares changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. TNH's debt ratio of 9.3% is on the low side. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar 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. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.
Underperforming the market overall, the Basic Materials sector (XLB) is up 0.1%, and these are its current biggest movers:
| Company | Market Cap | Percentage Change |
| American (NYSE:AVD) | $870.9 million | +3.1% |
| Weyerhaeuser (NYSE:WY) | $13.9 billion | +2.7% |
| CF Industries (NYSE:CF) | $13.25 billion | +2.6% |
| Cliffs Natural Resources (NYSE:CLF) | $5.94 billion | -2.5% |
| Sasol Limited (NYSE:SSL) | $31.22 billion | -2.3% |
| Agrium Inc (NYSE:AGU) | $16.05 billion | +2.2% |
| Terra Nitrogen Company (NYSE:TNH) | $3.89 billion | +2.1% |
American (NYSE:AVD) is at $32.17 per share after an increase of 3.1%. The company's volume for the day so far is 81,978 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). AVD has a PEG ratio of 1.25. 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.
Weyerhaeuser (NYSE:WY) is currently trading at $26.54 per share, a 2.7% increase. So far today, the company's volume is 2.3 million shares, in keeping with its current three-month average. Price change alone is not enough to know how a stock is doing. Volume is an important secondary indicator used to confirm trends suggested by price movement. 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 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 WY is a high 1.86. 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.
CF Industries (NYSE:CF) is up 2.6% to reach a current price of $216.74 per share. The company's volume is currently 547,855 shares. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CF has a low capitalization ratio of 24.2%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Cliffs Natural Resources (NYSE:CLF) is currently trading at a share price of $40.63, a 2.5% decline. At 5.6 million shares, the company's volume so far today is consistent 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. 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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for CLF is 0.92 because the stock is trading for less than its book value. This could mean that either the market believes the asset value is overstated, or the company is earning a very poor (even negative) 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: How Buybacks Warps The Price-To-Book Ratio
At $45.36, Sasol Limited (NYSE:SSL) has slipped 2.3%. The company is currently trading a volume of 131,008 shares. Volume is an important indicator because it indicates how significant a price shift is. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. SSL's dividend yield is 3.1%. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Investment Valuation Ratios: Dividend Yield
After an increase of 2.2%, Agrium Inc (NYSE:AGU) has reached a current price of $103.82. The company's volume is currently 694,092 shares for the day, 0.7 times its average over the past 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. 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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. The P/E ratio for AGU is 10.7, above the industry average of 9.53. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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: Can Investors Trust the P/E Ratio?
Terra Nitrogen Company (NYSE:TNH) has increased to a share price of $214.79, a 2.1% rise. So far today, the company's volume is 9,097 shares. At this rate, trading activity will likely be down from yesterday when 22,863 shares changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. TNH's debt ratio of 9.3% is on the low side. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar 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. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.
by
Investopedia Staff
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