Filed Under: ,
Tickers in this Article: CE, VAL, RNF, MON, DEL, ALB, SHW
The market is currently up, with the Nasdaq increasing 0.1%, the S&P 500 climbing 0.2% and the Dow 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 0.8%, outperforming the market overall. The biggest movers in the sector so far are:
CompanyMarket CapPercentage Change
Celanese (NYSE:CE).61 billion+3.3%
Valspar (NYSE:VAL).14 billion+3%
Rentech Nitrogen (NYSE:RNF).4 billion+2.9%
Monsanto (NYSE:MON).46 billion+2.7%
Deltic (NYSE:DEL)5.2 million-2.6%
Albemarle (NYSE:ALB).71 billion+2.5%
Sherwin-Williams (NYSE:SHW).93 billion+2.4%
Broker Summary: Fidelity Online Brokerage

Increasing 3.3%, Celanese (NYSE:CE) is trading at $42.85 per share. At 687,756 shares, the company's volume so far today is in keeping with the average volume over the past three months. Volume is an important indicator because it indicates how significant a price shift is. 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/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. CE's stock is trading for more than its book value with a P/B ratio of 3.84. 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. 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: Using The Price-To-Book Ratio To Evaluate Companies

Increasing 3%, Valspar (NYSE:VAL) is trading at $58.36 per share. The company's volume for the day so far is 194,212 shares. At this rate, trading activity will likely be down from yesterday when 634,194 shares changed hands. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. VAL has a dividend yield of 1.4%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Guide To Stock-Picking Strategies: Income Investing

Rentech Nitrogen (NYSE:RNF) has moved up 2.9% and is currently trading at $37.71 per share. At 121,412 shares, the company's volume so far today is 0.4 times the average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that 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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. RNF's P/E ratio of 122.1 is above the industry average of 9.36. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

Monsanto (NYSE:MON) has risen 2.7% and is currently trading at $91.50 per share. So far today, 2.6 million shares have changed hands. 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. 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 shows the proportion of assets that a company is financing through debt. MON has a debt ratio of 39.6%, which is fairly low. 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.

After a decline of 2.6%, Deltic (NYSE:DEL) has hit a share price of $65.05. The company's volume is currently 11,186 shares for the day, 0.4 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 allow the investor to make a quick determination as to a company's investment value. The price/sales ratio measures a company's stock market price by its revenues. DEL has a high P/S ratio of 6.03. This could be a good sign if the share price increases. 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.

Albemarle (NYSE:ALB) is up 2.5% to reach a current price of $53.99 per share. The company is trading at a volume of 691,595 shares. This is about the same trading activity as there was yesterday. 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. 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. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. The capitalization ratio for ALB is 30.3%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Sherwin-Williams (NYSE:SHW) has risen 2.4% to hit a current price of $149.01 per share. At 467,073 shares, the company's volume so far today is 0.7 times the average daily volume. Volume indicates the level of interest that investors have in a company at its current price. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). SHW has a PEG ratio of 1.54, which is consistent with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.

comments powered by Disqus

Trading Center