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Do you prefer commodities for their diversification and inflation-hedging characteristics? One way to get exposure to commodities is through basic materials stocks. However it's important to keep in mind that these stocks are still exposed to company risks that are separate from the risks of commodities prices.

We ran a screen on U.S.-traded stocks in the basic materials industry. We first screened for those companies that appear undervalued relative to earnings growth, with PEG below 1.

Then we screened to find those with high profitability, beating their industry averages on gross, operating and pretax margins by at least 5% each. This indicates that these names are taking a greater percentage of their revenues as profits, and they may also have greater control over their cost structure.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Do you think these names are undervalued and should be trading higher? Use this list as a starting point for your own analysis.

List sorted by difference between gross margin and industry average.

1. Yongye International, Inc. (YONG): Engages in the research, development, manufacture and sale of fulvic acid based liquid and powder nutrient compounds for plants and animals, which are used in the agriculture industry in the People's Republic of China. Market cap at $164.76M. Price at $3.17. PEG at 0.21. TTM gross margin at 59.98% vs. industry average at 37.29%. TTM operating margin at 31.3% vs. industry average at 17.27%.TTM pretax margin at 31.62% vs. industry average at 16.49%.

2. Unit Corp. (UNT): Engages in onshore contract drilling of oil and gas wells (for its own account as well as for other companies), exploration and production of oil and gas, and the gathering and transportation of natural gas primarily in the U.S. Market cap at $2.05B. Price at $41.46. PEG at 0.61. TTM gross margin at 52.36% vs. industry average at 34.18%. TTM operating margin at 26.79% vs. industry average at 17.91%. TTM pretax margin at 26.38% vs. industry average at 13.4%.

3. RPC Inc. (RES): Provides a range of oilfield services and equipment to the oil and gas companies primarily in the United States. Market cap at $2.21B. Price at $9.88. PEG at 0.32. TTM gross margin at 45.15% vs. industry average at 34.18%. TTM operating margin at 26.85% vs. industry average at 17.91%.TTM pretax margin at 26.46% vs. industry average at 13.4%.

*Profitability data sourced from Fidelity, all other data sourced from Finviz.

Source: 3 Undervalued Basic Materials Stocks With Impressive Profitability