Interested in basic materials stocks? Are you especially interested when they are undervalued, but profitable? If so, you might like what we've put in our list.
For starters, EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
We first looked for Basic Materials stocks that have posted strong earnings growth for shareholders over an extended period of time (1-year fiscal EPS growth rate>10%) and that are undervalued (P/BV<1). From our narrowed list of companies, we then further screened for businesses that are trading at a discount (P/E<10). We did not screen out any market caps.
Do you think these basic-materials stocks hold value that has yet to be priced in? Use this list as a starting-off point for your own analysis.
1) REX American Resources Corporation (REX)
REX American Resources Corporation has Earnings Per Share Growth of 736.83% and Price/Book Value Ratio of 0.91 and Price/Earnings Ratio of 9.51. The short interest was 6.55% as of 04/26/2012. REX American Resources Corporation engages in the production and sale of ethanol and distillers grains. It is also involved in leasing real estate properties. The company was formerly known as REX Stores Corporation and changed its name to REX American Resources Corporation in June 2010 to reflect the company's focus.
2) Double Eagle Petroleum Co. (DBLE)
|Industry:||Independent Oil & Gas|
Double Eagle Petroleum Co. has Earnings Per Share Growth of 343.92% and Price/Book Value Ratio of 0.64 and Price/Earnings Ratio of 7.61. The short interest was 2.40% as of 04/26/2012. Double Eagle Petroleum Co., an independent energy company, engages in the exploration, development, production, and sale of natural gas and crude oil primarily in the Rocky Mountain Basins of the western United States.
The company's properties include the Atlantic Rim coal bed natural gas project located in south central Wyoming; the Pinedale Anticline in the Green River Basin of Wyoming; and the Wind River Basin in central Wyoming, as well as engages in drilling activities in the Moxa Arch and other areas in Southwest Wyoming. It also operates 91 producing wells in the state of Wyoming, 4 wells in Texas, and 1 well in Oklahoma; and transports gas through intrastate gas pipeline.
3) Thompson Creek Metals Company Inc. (TC)
|Industry:||Industrial Metals & Minerals|
Thompson Creek Metals Company Inc. has Earnings Per Share Growth of 132.37% and Price/Book Value Ratio of 0.59 and Price/Earnings Ratio of 3.60. The short interest was 5.25% as of 04/26/2012. Thompson Creek Metals Company Inc. engages in mining, milling, processing, and marketing of molybdenum products in the United States and Canada. Its principal properties include the Thompson Creek Mine, an open-pit molybdenum mine and concentrator located in Idaho; the Endako Mine, an open-pit molybdenum mine, concentrator, and roaster in British Columbia; and the Langeloth metallurgical facility in Pennsylvania.
The company also holds interests in exploration properties comprising the Berg property, a copper, molybdenum, and silver exploration project located in British Columbia; the Davidson property, an underground molybdenum exploration project in British Columbia; the Howard's Pass property, a lead and zinc project situated in the Yukon territory-northwest territories border; and the Maze Lake property, a gold project located in the Kivalliq district of Nunavut.
* Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.