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Tickers in this Article: TPCG, LXU, SCHN, CLF, MLI, CRS, EMN
The market is having a good day so far: the Nasdaq is up 1.2%; the S&P 500 is trading up 0.6%; and the Dow has increased 0.7%. 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.

Underperforming the market overall, the Basic Materials sector (XLB) is up 0.4%, and these are its current biggest movers:
CompanyMarket CapPercentage Change
Albemarle Corporation (NYSE:ALB)$5.1 billion-4.4%
Innospec Inc. (Nasdaq:IOSP)$708.3 million+3.6%
Parker-Hannifin (NYSE:PH)$11.16 billion+3.1%
Chemtura Corporation (NYSE:CHMT)$1.43 billion-3.1%
Agrium Inc. (USA) (NYSE:AGU)$14.63 billion+2.9%
NewMarket Corporation (NYSE:NEU)$3.07 billion+2.9%
Goldcorp Inc. (USA) (NYSE:GG)$27.26 billion-2.7%
Forex Broker Summary: UFXMarkets

Albemarle (NYSE:ALB) is trading at $54.71 per share, down 4.4%. At 835,272 shares, the company's volume so far today is 1.3 times the average volume over the last three months. High volume indicates a lot of investor interest while low volume indicates the opposite. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. The gross profit margin for ALB is 34.4%. ALB has an operating profit margin of 20.8% and a net profit margin of 15.2%, both low compared to its gross profit margin.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The dividend yield is calculated by dividing a company's dividends per share by its stock price. ALB has a low dividend yield of 1.4%. This could indicate that that the stock is overpriced or that future dividends might be higher. 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

Increasing 3.6%, Innospec (Nasdaq:IOSP) is trading at $31.80 per share. So far today, the company's volume is 20,163 shares. This is 0.2 times the average daily volume. 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. IOSP's gross profit margin is 31.8%. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. IOSP's operating profit margin of 15.5% is low relative to its gross profit margin. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. Net profit margin for the company is 6.6%.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. IOSP has a P/S ratio of 0.89, on the low end. 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.

Parker-Hannifin (NYSE:PH) is currently trading at $76.18 per share, a 3.1% increase. At one million shares, the company's volume so far today is while it was 1.2 million shares yesterday. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin analysis is a great way to understand the profitability of companies. PH has a gross profit margin of 28.5%. Compared with its gross profit margin, PH's operating profit margin of 12.5% and net profit margin of 8.7% are low.

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 debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for PH is a low 48.8%. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Chemtura (NYSE:CHMT) is down 3.1% to reach $14.01 per share. So far today, the company's volume is 336,998 shares. Volume indicates the level of interest that investors have in a company at its current price. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. CHMT has a low gross profit margin of 24.4%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Operating margin for CHMT is 5.8% and net margin is 4.4%, both low relative to its gross margin.

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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. CHMT has a D/E ratio of 75%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Agrium Inc (NYSE:AGU) has moved up 2.9% and is currently trading at $95.29 per share. With 1.2 million shares changing hands so far today, the company's volume is 1.2 times the current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin ratios highlight companies that are worth further examination. AGU has a gross profit margin of 29.7%. AGU has an operating profit margin of 6.8% and a net profit margin of 8.4%, both low compared to its gross profit margin.

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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). The P/E ratio for AGU is 10.7, above the industry average of 7.72. This could mean that the market is expecting big things over the next few months or years. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Investment Valuation Ratios: Price/Earnings Ratio

NewMarket (NYSE:NEU) is at $235.99 per share after an increase of 2.9%. So far this morning, 30,619 shares have changed hands. This is 0.6 times its current daily average. A stock's volume conveys how excited investors are about it. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. NEU's gross profit margin is 26.7%. Relative to its gross profit margin, NEU's operating profit margin of 18.6% and net profit margin of 10.2% are low.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a 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. NEU has a fairly low capitalization ratio of 25.5%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

Goldcorp Inc (NYSE:GG) has decreased to $32.75 per share, a 2.7% fall. So far today, 2.5 million shares have changed hands, lighter than yesterday's volume of 6.5 million shares. The trading volume for a stock indicates the level of investor interest. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. GG has a gross profit margin of 61.3%. The operating profit margin indicates how much EBIT is generated per dollar of sales. With an operating profit margin of 38.5%, GG has a low one relative to its gross profit margin. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. The company has a net profit margin of 31.1%.

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/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. GG has a PEG ratio of 1.32. 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 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.

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