The market is currently up, with the Nasdaq up 1.1%, the S&P 500 increasing 1.3% and the Dow climbing 1.4%. 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.
The Basic Materials sector (XLB) is up 0.3%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Cliffs Natural Resources (NYSE:CLF)||$5.86 billion||-10.4%|
|Agnico-Eagle Mines Limited (USA) (NYSE:AEM)||$6.67 billion||+7.9%|
|Reliance Steel & Aluminum (NYSE:RS)||$3.38 billion||+7.2%|
|Kaiser Aluminum Corp. (Nasdaq:KALU)||$955.2 million||+7%|
|Barrick Gold Corporation (USA) (NYSE:ABX)||$33.82 billion||-6.3%|
|Clearwater Paper Corp (NYSE:CLW)||$784.9 million||+5.8%|
|Syngenta AG (ADR) (NYSE:SYT)||$30.67 billion||+4.9%|
Broker Summary: E-Trade Financial
After a precipitous drop of 10.4%, Cliffs Natural Resources (NYSE:CLF) is now trading at a share price of $36.86. This morning, the company is trading a volume of 7.9 million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. Dividend yield measures the income that a stock will generate for an investor. Dividend yield for CLF is 6.1%. 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
Rising 7.9%, Agnico-Eagle Mines Limited (NYSE:AEM) is currently trading at $42 per share. At 3.2 million shares, the company's volume so far today is 2.1 times its 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. 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 price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. AEM has a high P/S ratio of 3.03. 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.
Reliance Steel (NYSE:RS) has moved up 7.2% and is currently trading at $48.20 per share. So far today, 614,866 shares of the company's stock have changed hands. This is on pace to reach yesterday's trading volume of 1.4 million shares. Volume is used to evaluate how meaningful the price movement of a stock 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. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. RS' debt ratio of 45% is on the low side. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Kaiser (Nasdaq:KALU) has risen 7% and is currently trading at $52.98 per share. The company's volume is currently 106,384 shares for the day, 0.9 times its current three-month average. A stock's volume conveys how excited investors are about it. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. KALU has a low debt-equity ratio of 16%. This shows that the company's assets are financed primarily through equity. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
At $31.66, Barrick Gold Corporation (NYSE:ABX) has slipped 6.3%. So far today, the company's volume is 14.8 million shares. The trading volume for a stock indicates the level of investor interest. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for ABX is 33.4%. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
Clearwater (NYSE:CLW) is at $35.53 per share after an increase of 5.8%. At 63,553 shares, the company's volume so far today is one times the current daily average. Volume is an important indicator because it indicates how significant a price shift is. 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. 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. CLW has a P/B ratio of 1.73 which shows that its share price is higher than its book value. 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: Using The Price-To-Book Ratio To Evaluate Companies
Syngenta AG (NYSE:SYT) has risen 4.9% to hit a current price of $68.04 per share. The company's volume for the day so far is 246,628 shares. This is a sign that there will be less trading activity than there was yesterday. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. SYT has a P/E ratio of 18.7, high compared to the industry average of 15.99. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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: Profit With The Power Of Price-To-Earnings
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.