3 Stocks Pushing The Basic Materials Sector Lower

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

The Basic Materials sector as a whole closed the day down 1.0% versus the S&P 500, which was up 0.2%. Laggards within the Basic Materials sector included Alderon Iron Ore ( AXX), down 3.5%, PostRock Energy ( PSTR), down 3.6%, Mines Management ( MGN), down 6.4%, China Gerui Advanced Materials Group ( CHOP), down 3.2% and Saratoga Resources ( SARA), down 7.8%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the sector lower today:

Mines Management ( MGN) is one of the companies that pushed the Basic Materials sector lower today. Mines Management was down $0.04 (6.4%) to $0.60 on light volume. Throughout the day, 17,746 shares of Mines Management exchanged hands as compared to its average daily volume of 42,200 shares. The stock ranged in price between $0.60-$0.63 after having opened the day at $0.63 as compared to the previous trading day's close of $0.64.

Mines Management, Inc., together with its subsidiaries, acquires, explores, and develops various mineral properties in North and South America. The company explores for silver, and associated base and precious metals. Mines Management has a market cap of $17.6 million and is part of the energy industry. Shares are down 1.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Mines Management as a sell. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

Highlights from TheStreet Ratings analysis on MGN go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, MINES MANAGEMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • MINES MANAGEMENT INC reported flat earnings per share in the most recent quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MINES MANAGEMENT INC continued to lose money by earning -$0.25 versus -$0.28 in the prior year.
  • The net income growth from the same quarter one year ago has exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income increased by 0.8% when compared to the same quarter one year prior, going from -$1.84 million to -$1.82 million.
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • MGN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.69, which clearly demonstrates the ability to cover short-term cash needs.

You can view the full analysis from the report here: Mines Management Ratings Report

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At the close, PostRock Energy ( PSTR) was down $0.03 (3.6%) to $0.70 on light volume. Throughout the day, 14,515 shares of PostRock Energy exchanged hands as compared to its average daily volume of 30,700 shares. The stock ranged in price between $0.70-$0.72 after having opened the day at $0.72 as compared to the previous trading day's close of $0.72.

PostRock Energy Corporation, an independent oil and gas company, is engaged in the acquisition, exploration, development, production, and gathering of crude oil and natural gas. PostRock Energy has a market cap of $44.2 million and is part of the energy industry. Shares are down 39.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates PostRock Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on PSTR go as follows:

  • The debt-to-equity ratio of 1.27 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, PSTR has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has decreased to $5.71 million or 25.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • PSTR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 53.34%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, POSTROCK ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • 49.25% is the gross profit margin for POSTROCK ENERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.15% significantly outperformed against the industry average.

You can view the full analysis from the report here: PostRock Energy Ratings Report

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Alderon Iron Ore ( AXX) was another company that pushed the Basic Materials sector lower today. Alderon Iron Ore was down $0.01 (3.5%) to $0.34 on average volume. Throughout the day, 39,756 shares of Alderon Iron Ore exchanged hands as compared to its average daily volume of 43,500 shares. The stock ranged in price between $0.33-$0.36 after having opened the day at $0.36 as compared to the previous trading day's close of $0.36.

Alderon Iron Ore has a market cap of $46.5 million and is part of the energy industry. Shares are down 77.3% year-to-date as of the close of trading on Friday. Currently there are 3 analysts who rate Alderon Iron Ore a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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