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With the way the market has been going it seems like everyone is throwing out the trash and no one is seeing the treasure. The Price/Book Value ratio is one indicator to see if there is any “treasure” among the pile of trash investors see piling up in the markets. Generally if the ratio is less than one it is said to trading at less than “break up value” & undervalued. There's never a guarantee that anything trading below book value is gold but it often deserves further inspection.

The Return on Asset (ROA) ratio gives a picture of how much profitability is being generated from the firm’s assets. Often this can help indicate to investors whether assets are being properly utilized and or potentially outdated. A low ROA number because of obsolete assets often means a large capital expenditure could be looming in the near future.

We ran a screen for Materials companies that had a Price/Book Value ratio of 1 or less. From this pool we screened for companies that held a moderate ROA ratio (X>=5%).

The list is ranked from lowest to highest Price/Book Value ratio.

1. Ternium SA (NYSE:TX)

Sector

Basic Materials

Industry

Steel

Market Cap

$ 4,422M

Beta

2.57

Analyst Sentiment

9/10 – List Buy/ Outperform (Bullish)

The company produces finished and semi-finished steel products in the US. The firm’s book value is 0.73. The firm’s Return on Assets (TTM) is 5.60%

Short Interest Note:
N/A

2. DRDGold Limited. (DROOY)

Sector

Basic Materials

Industry

Gold

Market Cap

$ 173M

Beta

0.34

Analyst Sentiment

2/3 – List Sell/Underperform (Bearish)

The company engages in the exploration, mining, and smelting of gold. The company is book value is 0.77. The firm’s Return on Assets (TTM) is 8.12%.

Short Interest Note:
N/A

3. POSCO (NYSE:PKX)

Sector

Basic Materials

Industry

Steel

Market Cap

$ 27,690M

Beta

1.71

Analyst Sentiment

28/30 – List Buy/Outperform (Bullish)

The company is one of the largest steel manufactures in the world & based in South Korea. The firm’s book value is 0.81. The firm’s Return on Assets (TTM) is 6.02%.

Short Interest Note:
N/A

4. Domtar Corp (NYSE:UFS)

Sector

Basic Materials

Industry

Paper & Paper Products

Market Cap

$ 2,665M

Beta

3.06

Analyst Sentiment

7/13– List Buy/ Outperform (Bullish)

The Company manufactures and sells fine paper coated groundwood, fine paper, and more. The firm’s book value is 0.83. The firm’s Return on Assets (TTM) is 10.04%.

Short Interest Note:
The short interest for the firm is 4.80% as of 07/15/2011.

5. Owens-Corning, Inc. (NYSE:OC)

Sector

Basic Materials

Industry

Media - Diversified

Market Cap

$ 3,189M

Beta

2.21

Analyst Sentiment

7/13 – List Buy/ Outperform (Neutral)

The company produces construction materials and glass fiber reinforcements.The firm’s book value is 0.84. The firm’s Return on Assets (TTM) is 13.03%.

Short Interest Note:
The short interest for the firm is 9.20% as of 07/15/2011. Given the short number this company may be a short favorite or potentially a great short squeeze.

6. Yongye International, Inc. (NASDAQ:YONG)

Sector

Basic Materials

Industry

Agricultural Inputs

Market Cap

$ 202M

Beta

0.27

Analyst Sentiment

1/1 – List Hold/ Neutral (Neutral)

The company sells fulvic-acid-based nutrient compounds for plant and animal feed in China.The firm’s book value is 0.88. The firm’s Return on Assets (TTM) is 19.56%.

Short Interest Note:
The short interest for the firm is 8.80%% as of 07/15/2011. Given the short number this company may be a short favorite or potentially a great short squeeze.

7. James River Coal Company (JRCC)

Sector

Basic Materials

Industry

Coal

Market Cap

$ 416M

Beta

1.96

Analyst Sentiment

6/11 – List Buy/ Outperform (Bullish)

The Company mines & sells a variety of coals throughout eastern Kentucky and in southern Indiana. The firm’s book value is 0.92. The firm’s Return on Assets (TTM) is 9.96%.

Short Interest Note:
The short interest for the firm is 36.60% as of 07/15/2011.

We hope this list helps investors as they do their own due diligence and look for extremely undervalued Materials companies with productive assets that might just turn out to be gold.

Source: 7 Undervalued Material Companies With Productive Assets