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Tickers in this Article: SLT, NEM, AEM, GOLD, RGLD, AGU, HMY
It's been a good morning for the market. The Nasdaq is trading up 0.8%; the S&P 500 has moved up 0.8%; and the Dow has increased 0.9%. 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.

Outperforming the market overall, the Basic Materials sector (XLB) is up 1.2% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Sterlite Industries India Limited (NYSE:SLT)$6.09 billion-3.4%
Newmont Mining (NYSE:NEM)$23.85 billion+3.4%
Agnico-Eagle Mines Limited (NYSE:AEM)$7.89 billion+2.8%
Randgold Resources Ltd (Nasdaq:GOLD)$9 billion+2.5%
Royal Gold (Nasdaq:RGLD)$4.95 billion+2.4%
Agrium Inc (NYSE:AGU)$15.21 billion+2.4%
Harmony Gold Mining Co (NYSE:HMY)$3.63 billion-2.1%
Broker Summary: OptionsXpress Online Trading Platform

Sterlite Industries India Limited (NYSE:SLT) has fallen 3.4% and is currently trading at $7 per share. The company's volume for the day so far is 399,138 shares. 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. 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/book value ratio is calculated by dividing the current stock price by the company's book value per share. SLT has a P/B ratio of 0.65, which shows that its book value is higher than its share price. This could mean that either the market believes the asset value is overstated, or the company is earning a very poor (even negative) return on its assets. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: How Buybacks Warps The Price-To-Book Ratio

Newmont Mining (NYSE:NEM) has moved up 3.4% and is currently trading at $50.22 per share. The company's volume is currently 2.4 million shares for the day,. Volume is used to evaluate how meaningful the price movement of a stock is. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. Dividend yield measures the income that a stock will generate for an investor. Dividend yield for NEM is 2.9%. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Investment Valuation Ratios: Dividend Yield

Agnico-Eagle Mines Limited (NYSE:AEM) has risen 2.8% to hit a current price of $47.30 per share. So far today, 955,765 shares have changed hands. This is 0.7 times its current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. AEM's debt ratio of 35.4% 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.

Increasing 2.5%, Randgold Resources Ltd (Nasdaq:GOLD) is trading at $100.42 per share. The company's volume is currently 327,115 shares for the day, 0.9 times its current daily average. A stock's volume conveys how excited investors are about it. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. GOLD's P/S ratio of 6.67 is on the high side. This could be a good sign if the share price increases. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.

Royal Gold (Nasdaq:RGLD) is at $86.17 per share after an increase of 2.4%. This morning, the company is trading a volume of 211,010 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. RGLD has a fairly low capitalization ratio of 13.8%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. 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.

Agrium Inc (NYSE:AGU) is currently trading at $98.49 per share, a 2.4% increase. So far today, the company's volume is 516,093 shares, on pace to reach yesterday's volume of 1.1 million shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. PEG ratio for AGU is consistent with the industry average at 1.2. 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.

Harmony Gold Mining Co (NYSE:HMY) is down 2.1% to reach $8.25 per share. The company is currently trading a volume of two million shares. This is 0.8 times its average volume over the past 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. 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. HMY's stock is trading for less than its book value as can be seen from it's P/B value of 0.82. 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Using The Price-To-Book Ratio To Evaluate Companies

The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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