Seeking Alpha
Recommended for you:
Value
Profile| Send Message|
( followers)  

Interested in gaining exposure to basic materials companies? Do you prefer companies with strong profits? Do you look for companies with low debt? Do you prefer companies that can manage their long-term debt? You might like what we've put in our list.

Return on Equity (ROE) is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.

The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue

The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.

The Long-Term Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.

We first looked for basic materials stocks. We then looked for companies that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(Net Margin [TTM] >10%). We next screened for businesses that have maintained a sound capital structure (D/E Ratio<.3). We then looked for companies that operate with little to no long-term debt (Long-Term D/E Ratio<.1). We did not screen out any market caps.

Do you think these stocks are worth more than the market currently says? Please use our list to assist with your own analysis.

1) Blue Dolphin Energy Company (OTCQX:BDCO)

Sector: Basic Materials
Industry: Independent Oil & Gas
Market Cap: $16.72M
Beta: 2.11

Blue Dolphin Energy Company has a Return on Equity of 46.63% and Net Margin of 55.79% and Debt/Equity Ratio of 0.00 and Long-Term Debt/Equity Ratio of 0.00. The short interest was 6.37% as of 05/11/2012. As of February 15, 2012, Blue Dolphin Energy Company was acquired by Lazarus Energy, LLC, in a reverse merger transaction. Blue Dolphin Energy Company, through its subsidiaries, engages in the provision of pipeline transportation and related services for producers/shippers, and exploration and production of oil and gas in the United States. Its pipeline transportation and related services include the operation of the Blue Dolphin Pipeline system, which comprise the offshore segment that transports gas, and consists of approximately 34 miles of 20-inch pipeline from an offshore platform in Galveston Area Block 288 to shore, as well as the platform in Galveston Area Block 288 and five field gathering lines totaling approximately 27 miles connected to the main 20-inch line. The onshore segment consisting of approximately 2 miles of 16-inch pipeline for the transportation of gas from onshore facility to a sales point at a chemical plant complex and intrastate pipeline system tie-in in Freeport, Texas.

2) BP Prudhoe Bay Royalty Trust (NYSE:BPT)

Sector: Basic Materials
Industry: Oil & Gas Refining & Marketing
Market Cap: $2.55B
Beta: 0.63

This company has a Return on Equity of 22957.65% and Net Margin of 99.40% and Debt/Equity Ratio of 0.00 and Long-Term Debt/Equity Ratio of 0.00. The short interest was 2.64% as of 05/11/2012. BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interests constituting a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope in Alaska. The Prudhoe Bay field extends approximately 12 miles by 27 miles and contains approximately 150,000 gross productive acres.

3) Great Northern Iron Ore Properties (NYSE:GNI)

Sector: Basic Materials
Industry: Steel & Iron
Market Cap: $95.80M
Beta: 0.38

Great Northern Iron Ore Properties has a Return on Equity of 225.68% and Net Margin of 86.20% and Debt/Equity Ratio of 0.00 and Long Term Debt/Equity Ratio of 0.00. The short interest was 5.05% as of 05/11/2012. Great Northern Iron Ore Properties, a conventional nonvoting trust, owns and leases mineral and non-mineral lands on the Mesabi Iron Range in northeastern Minnesota. It owns mineral interests in approximately 12,033 acres on the Mesabi Iron Range Formation, including approximately 9,895 acres of leased and 2,138 acres of unleased mineral interests. The company was founded in 1906 and is based in Saint Paul, Minnesota.

4) Cross Timbers Royalty Trust (NYSE:CRT)

Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Market Cap: $240.36M
Beta: 0.60

Cross Timbers Royalty Trust has a Return on Equity of 131.10% and Net Margin of 97.68% and Debt/Equity Ratio of 0.00 and Long-Term Debt/Equity Ratio of 0.00. The short interest was 0.79% as of 05/11/2012. Cross Timbers Royalty Trust operates as an express trust in the United States. The company holds 90% net profits interests in various royalty and overriding royalty interest properties in Texas, Oklahoma, and New Mexico.

5) Gold Resource Corp (NYSEMKT:GORO)

Sector: Basic Materials
Industry: Gold
Market Cap: $1.35B
Beta: 1.08

Gold Resource Corp has a Return on Equity of 85.30% and Net Margin of 57.17% and Debt/Equity Ratio of 0.00 and Long-Term Debt/Equity Ratio of 0.00. The short interest was 9.34% as of 05/11/2012. Gold Resource Corporation, an exploration stage company, engages in the exploration for and production of gold and silver in Mexico. It also explores copper, lead, and zinc ores. The company holds a 100% interest in six properties, including the El Aguila Project, the El Rey property, the Las Margaritas property, the Solaga property, the Alta Gracia property, and the El Chamizo property located in southern State of Oaxaca.

6) C&J Energy Services, Inc. (NYSE:CJES)

Sector: Basic Materials
Industry: Oil & Gas Equipment & Services
Market Cap: $1.04B
Beta: -

C&J Energy Services, Inc. has a Return on Equity of 64.21% and Net Margin of 21.36% and Debt/Equity Ratio of 0.00 and Long-Term Debt/Equity Ratio of 0.00. The short interest was 97.99% as of 05/11/2012. C&J Energy Services, Inc., through its subsidiaries, provides hydraulic fracturing, coiled tubing, and pressure pumping services to oil and natural gas exploration and production companies. The company offers hydraulic fracturing services to enhance the production of oil and natural gas from formations with low permeability; coiled tubing services to perform various functions associated with well-servicing operations and to facilitate completion of horizontal wells; and pressure pumping services, which include well injection, cased-hole testing, workover pumping, mud displacement, wireline pumpdowns, and pumping-down coiled tubing. It also constructs and sells oilfield equipment comprising hydraulic fracturing pumps, coiled tubing units, pressure pumping units, and other equipment for third-party customers in the energy services industry; and provides equipment repair services, and oilfield parts and supplies.

*Company profiles were sourced from Finviz.

Source: 6 Basic Materials Stocks Raking In Profits Without Amassing Debt