Currently, the Nasdaq has been relatively flat, the S&P 500 is trading up 0.4% and the Dow is up 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 biggest movers in the Basic Materials sector (XLB) (+0.9%) are:
|Company||Market Cap||Percentage Change|
|Silver Wheaton Corp (NYSE:SLW)||$13.72 billion||+3.2%|
|Coeur d\'Alene (NYSE:CDE)||$2.5 billion||+2.9%|
|Kraton Performance Polymers (NYSE:KRA)||$698.3 million||-2.4%|
|Rentech Nitrogen (NYSE:RNF)||$1.37 billion||-2.3%|
|Randgold Resources Ltd (Nasdaq:GOLD)||$11.26 billion||+2.1%|
|Royal Gold (Nasdaq:RGLD)||$5.73 billion||+2%|
|RPM International (NYSE:RPM)||$3.57 billion||-2%|
Broker Summary: E-Trade Financial
After an increase of 3.2%, Silver Wheaton Corp (NYSE:SLW) has reached a current price of $40.03. So far today, the company's volume is 2.9 million shares. Yesterday, volume was only 2.6 million shares. If a stock is trading on low volume, then there is not much interest in the stock. On the other hand, if a stock is trading on high volume, then there is a lot of interest in the stock. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. SLW has a P/E ratio of 24.2, high compared to the industry average of 2.64. 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: How To Find P/E And PEG Ratios
Coeur d'Alene (NYSE:CDE) is at $28.62 per share after an increase of 2.9%. At 857,651 shares, the company's volume so far today is 0.3 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. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CDE has a low capitalization ratio of 2.4%. Low leverage is a significant balance sheet strength, a sign of a less risky investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Currently trading at $21.15 per share, Kraton Performance Polymers (NYSE:KRA) has fallen 2.4%. The company is currently trading a volume of 224,281 shares. 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. 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. KRA has a P/B ratio of 1.26 which shows that its share price is higher than its book value. 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. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Falling 2.3%, Rentech Nitrogen (NYSE:RNF) is currently at a share price of $35.09. So far today, the company's volume is 385,971 shares, 0.7 times the average daily volume. If a stock price moves on high volume, this means that the change is a significant one. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The dividend yield is calculated by dividing a company's dividends per share by its stock price. RNF has a high dividend yield of 13%. Companies with large dividends tend to cut them to preserve cash flow, so watch out that you don't end up with a stock that might not be worth owning. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Due Diligence On Dividends
Randgold Resources Ltd (Nasdaq:GOLD) has risen 2.1% to hit a current price of $125.11 per share. The company's volume is currently 678,131 shares. 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/sales ratio measures a company's stock market price by its revenues. The P/S ratio for GOLD is a high 6.67. 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.
Royal Gold (Nasdaq:RGLD) is currently trading at $99.26 per share, a 2% increase. So far today, the company's volume is 187,309 shares, 0.2 times the current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt ratio shows the proportion of assets that a company is financing through debt. RGLD's debt ratio of 22.5% is on the low side. 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. 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.
RPM International (NYSE:RPM) is down 2% to reach $26.49 per share. This morning, the company is trading a volume of 1.4 million shares. Volume is an important indicator because it indicates how significant a price shift is. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. RPM has a D/E ratio of 94%. 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.
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. 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.
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