Filed Under: ,
Tickers in this Article: SHI, KIOR, EMN, ROC, KGC, DEL, UFS
The Nasdaq is up 0.2%, the S&P 500 has moved up 0.5% and the Dow has climbed 0.5% on a good day for the market so far. 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 1.1%, outperforming the market overall. The biggest movers in the sector so far are:
CompanyMarket CapPercentage Change
Sinopec Shanghai Petrochemical Co (NYSE:SHI)$1.85 billion+9.8%
KiOR (Nasdaq:KIOR)$830 million-3.8%
Eastman Chemical (NYSE:EMN)$7.95 billion+3%
Rockwood Holdings (NYSE:ROC)$3.75 billion+2.5%
Kinross Gold Corporation (NYSE:KGC)$12.63 billion-2.1%
Deltic (NYSE:DEL)$849.3 million+1.9%
Domtar Corp (NYSE:UFS)$3.35 billion+1.8%
Beginner's Guide To FXCM And Trading Station

Sinopec Shanghai Petrochemical Co (NYSE:SHI) has risen 9.8% to hit a current price of $28.20 per share. The company's volume is currently 25,435 shares for the day, 2.2 times the average volume over the last three months. 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. 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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. SHI has a P/B ratio of 0.78, which shows that its book value is higher than its share price. This is due to one of two possibilities: that the stock is being unfairly or incorrectly undervalued by investors because of some transitory circumstance and represents an attractive buying opportunity at a bargain price or that the market's low opinion and valuation of the company are correct, at least over the foreseeable future. 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

After a decline of 3.8%, KiOR (Nasdaq:KIOR) has hit a share price of $7.62. The company's volume for the day so far is 46,208 shares. A stock's volume conveys how excited investors are about it. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for KIOR is a low 38.7%. 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Rising 3%, Eastman Chemical (NYSE:EMN) is currently trading at $59.23 per share. The company's volume is currently 690,055 shares for the day, in line with the current daily average. 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. 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. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. EMN has a D/E ratio of 181%, which is relatively high. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Rockwood Holdings (NYSE:ROC) has increased to a share price of $49.57, a 2.5% rise. So far today, 452,920 shares of the company's stock have changed hands. 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. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. ROC's capitalization ratio of 51% is relatively high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Kinross Gold Corporation (NYSE:KGC) is down 2.1% to reach $10.85 per share. The company's volume for the day so far is 4.7 million shares, 0.4 times the current three-month average. Volume is used to evaluate how meaningful the price movement of a stock 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. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. KGC's P/B ratio of 0.96 indicates that its share price is lower than its book value. Industries that require more infrastructure capital (for each dollar of profit) will usually trade at P/B ratios much lower than those that don't. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: How Buybacks Warps The Price-To-Book Ratio

Deltic (NYSE:DEL) is currently trading at $68.36 per share, a 1.9% increase. The company is currently trading a volume of 2,128 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The dividend yield for DEL is 0.4%, which is on the low end. This may indicate that the company's stock is overpriced. 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: Due Diligence On Dividends

Domtar Corp (NYSE:UFS) is at $80.25 per share after an increase of 1.8%. The company's volume is currently 112,670 shares for the day, 0.2 times the average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for UFS is 0.5, which is relatively low. Low P/S ratios can indicate unrecognized value potential - so long as other criteria like high profit margins, low debt levels and growth prospects are in place. 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.

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

comments powered by Disqus

Trading Center