Filed Under: ,
Tickers in this Article: RNF, MOS, MLI, UFS, POT, MEOH, VAL
The Nasdaq is trading up 0.4%, the S&P 500 has moved up 0.1% and the Dow is trading down 0.2% so far today. 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 biggest movers in the Basic Materials sector (XLB) (+0.5%) are:
CompanyMarket CapPercentage Change
Rentech Nitrogen (NYSE:RNF)$1.5 billion-4.3%
Mosaic (NYSE:MOS)$17.92 billion-4.1%
Mueller Industries (NYSE:MLI)$1.82 billion+3.7%
Domtar Corp (NYSE:UFS)$3.28 billion+2.6%
Potash Corp./Saskatchewan (NYSE:POT)$37.55 billion-2.6%
Methanex Corporation (Nasdaq:MEOH)$2.68 billion+2.5%
Valspar (NYSE:VAL)$5.04 billion+2.1%
Broker Summary: TD Ameritrade Thinkorswim

Rentech Nitrogen (NYSE:RNF) is down 4.3% to reach $37.57 per share. The company is currently trading a volume of 277,250 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. RNF has a debt ratio of 26%, which is fairly low. A low debt ratio means the company has more available cash flow. 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.

At $55.64, Mosaic (NYSE:MOS) has slipped 4.1%. At 5.9 million shares, the company's volume so far today is 1.4 times the average volume over the last three months. If a stock price moves on high volume, this means that the change is a significant one. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The debt-equity ratio of 9% is relatively low. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Mueller Industries (NYSE:MLI) has risen 3.7% to hit a current price of $49.46 per share. The company's volume is currently 186,909 shares. This is about the same trading activity as there was yesterday. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. 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. MLI's stock is trading for more than its book value with a P/B ratio of 2.09. This may be a sign that the company is overvalued. 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: How Buybacks Warps The Price-To-Book Ratio

Domtar Corp (NYSE:UFS) is at $79.24 per share after an increase of 2.6%. So far today, the company's volume is 198,569 shares, consistent with 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. 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. UFS' P/E ratio of 11.0 falls below the industry average of 13.63. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Profit With The Power Of Price-To-Earnings

Falling 2.6%, Potash Corp./Saskatchewan (NYSE:POT) is currently at a share price of $42.57. So far today, 3.9 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. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. PEG ratio for POT is consistent with the industry average at 1.4. 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.

After an increase of 2.5%, Methanex Corporation (Nasdaq:MEOH) has reached a current price of $29.29. The company's volume is currently 228,136 shares for the day, in keeping with the average volume over the past three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for MEOH is 37.5%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

After rising 2.1%, Valspar (NYSE:VAL) is currently trading at a share price of $56.72. The company is trading at a volume of 196,465 shares. At this rate, trading activity will likely be down from yesterday when 1.3 million shares changed hands. The trading volume for a stock indicates the level of investor interest. 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. Dividend yield measures the income that a stock will generate for an investor. VAL's dividend yield of 1.4% is fairly low. This could indicate that that the stock is overpriced or that future dividends might be higher. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Due Diligence On Dividends

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.

comments powered by Disqus

Trading Center