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Tickers in this Article: GGC, PPG, CCK, SON, CLF, GRA, LXU
The market is on the rise this morning. The Nasdaq has risen 1.1%; the S&P 500 has increased 0.3%; and the Dow is trading up 0.3%. 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 up 0.6%, underperforming the market overall. The biggest movers in the sector are currently:
CompanyMarket CapPercentage Change
Georgia Gulf Corporation (NYSE:GGC)$987.8 million+17.1%
PPG Industries (NYSE:PPG)$15.87 billion+4.8%
Crown Holdings, Inc. (NYSE:CCK)$5.09 billion+4.2%
Sonoco Products Company (NYSE:SON)$3.11 billion-3.9%
Cliffs Natural Resources (NYSE:CLF)$6.53 billion+3.1%
W.R. Grace & Co. (NYSE:GRA)$3.92 billion+2.7%
LSB Industries, Inc. (NYSE:LXU)$739.2 million-2.6%
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Georgia (NYSE:GGC) is trading at $33.77 per share, a significant rise of 17.1%. So far today, 3.7 million shares have changed hands. Volume is used to evaluate how meaningful the price movement of a stock is. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. GGC has a low gross profit margin of 13%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Compared with its gross profit margin, GGC's operating profit margin of 7.9% and net profit margin of 2.5% are low.

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. GGC's dividend yield of 1.1% is fairly low. A company with a low dividend yield may be a safer investment in the long run. For income-oriented investors such as retirees, a stock with a high dividend yield may be more attractive than a stock with a low dividend yield. SEE: Due Diligence On Dividends

PPG (NYSE:PPG) has increased to a share price of $109.24, a 4.8% rise. So far today, the company's volume is 2.3 million shares, 2.7 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. Margin ratios highlight companies that are worth further examination. The gross profit margin for PPG is 39.2%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. PPG's operating profit margin is 11.8%. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. The company's net profit margin is 5.8%.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. PPG's P/S ratio of 0.97 is fairly low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

Crown Holdings (NYSE:CCK) is up 4.2% to reach a current price of $35.63 per share. So far this morning, 955,407 shares have changed hands. This is 1.2 times its average daily volume. A stock's volume conveys how excited investors are about it. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. CCK has a low gross profit margin of 17.5%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. CCK has an operating profit margin of 9.3% and a net profit margin of 3.8%, both low compared to its gross profit margin.

Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt ratio shows the proportion of assets that a company is financing through debt. CCK's debt ratio of 104.5% is fairly high. This means that most of the company's assets are financed through debt. 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.

Sonoco Products (NYSE:SON) is down 3.9% to reach $29.69 per share. This morning, 686,901 shares have been traded, lighter than yesterday's volume of 943,558 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. SON has a low gross profit margin of 21%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Relative to its gross profit margin, SON's operating profit margin of 6.5% and net profit margin of 4.4% are low.

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 debt-equity (D/E) ratio is a leverage ratio. The D/E ratio for SON is 85%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Cliffs Natural Resources (NYSE:CLF) has risen 3.1% to hit a current price of $47.27 per share. So far today, the company's volume is 1.3 million 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. The gross profit margin for CLF is 41.2%. CLF's operating margin of 18.3% and net margin of 25.6% are low relative to its gross margin.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. Relative to the industry P/E ratio of 5.73, CLF's 4.1 is low. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Profit With The Power Of Price-To-Earnings

After an increase of 2.7%, W.R (NYSE:GRA) has reached a current price of $53.99. With 357,181 shares changing hands so far today, the company's volume is 0.5 times the average volume over the last three months. 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. GRA's gross profit margin is 39.9%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. Operating profit margin for GRA is 11.4%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net profit margin for the company is 8.4%.

Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. GRA's capitalization ratio of 79.5% is relatively high. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. 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.

LSB Industries (NYSE:LXU) is currently trading at a share price of $32.22, a 2.6% decline. The company's volume for the morning is 44,072 shares. This is 0.3 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin analysis is a great way to understand the profitability of companies. LXU has a gross profit margin of 28.5%. Operating margin for LXU is 12.1% and net margin is 9.5%, both low relative to its gross margin.

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. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. LXU has a PEG ratio of 0.98, which is consistent 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.

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. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

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