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Tickers in this Article: CE, OLN, CSL, CR, EGO, MEOH, PCP
The market is having a bad day so far. The Nasdaq is down 0.2%; the S&P 500 has slipped 0.5%; and the Dow has decreased 0.6%. 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 currently lagging behind the overall market, down 0.5%, and its current biggest movers are:
CompanyMarket CapPercentage Change
Celanese Corporation (NYSE:CE).56 billion+6.9%
Olin Corporation (NYSE:OLN).68 billion-5.3%
Carlisle Companies, Inc. (NYSE:CSL).22 billion-4.7%
Crane Co. (NYSE:CR).2 billion+4%
Eldorado Gold Corporation (USA) (NYSE:EGO).99 billion+4%
Methanex Corporation (USA) (Nasdaq:MEOH).63 billion+3.1%
Precision Castparts (NYSE:PCP).57 billion-2.4%
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After rising 6.9%, Celanese (NYSE:CE) is currently trading at a share price of $37.98. This morning, 1.5 million shares have been traded,. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. The debt ratio for CE is 82.5%, which is relatively high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. 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.

Slipping 5.3%, Olin (NYSE:OLN) is currently trading at $19.88 per share. So far today, 674,968 shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/sales ratio measures a company's stock market price by its revenues. OLN's P/S ratio of 0.86 is fairly low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

After a decline of 4.7%, Carlisle Companies (NYSE:CSL) has hit a share price of $49.49. With 503,776 shares changing hands so far today, the company's volume is 0.7 times its current three-month average. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CSL has a fairly low capitalization ratio of 27.9%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

Crane (NYSE:CR) has risen 4% to hit a current price of $38.87 per share. This morning, the company's volume is 217,758 shares. This is 0.9 times its average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Valuation ratios allow the investor to make a quick determination as to a company's investment value. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. CR's P/E ratio of 74.3 is above the industry average of 12.69. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: How To Find P/E And PEG Ratios

Eldorado Gold Corporation (NYSE:EGO) has moved up 4% and is currently trading at $10.20 per share. So far today, the company's volume is 1.8 million shares, consistent with the volume from yesterday lighter than yesterday's volume of 4.4 million shares. Volume indicates the level of interest that investors have in a company at its current price. 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. The price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. EGO has a PEG ratio of 3.44. 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.

Increasing 3.1%, Methanex Corporation (Nasdaq:MEOH) is trading at $28.91 per share. So far today, the company's volume is 183,142 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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. 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. MEOH has a P/B ratio of 1.91 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: How Buybacks Warps The Price-To-Book Ratio

At $158.35, Precision Castparts (NYSE:PCP) has slipped 2.4%. At 405,723 shares, the company's volume so far today is 0.6 times its average over the past three months. A stock's volume conveys how excited investors are about it. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. PCP has a low dividend yield of 0.1%. If you are an income investor, this stock may not be attractive to you. A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. SEE: Dividend Yield For The Downturn

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