On a day-to-day basis, most stocks tend not to have dramatic price movements. However, news and information that is fundamental to an industry, sector or stock's business does get released periodically. This type of news has the potential to move a stock by several percentage points, in either direction. But even if a stock has already moved, it might still warrant consideration as an investment. After good news, a stock may increase in value, but this momentum can often continue on for more upside. Likewise, bad news often knocks down a stock's price more than is warranted, causing it to sell at bargain levels until the price moves back up. (For related reading, see How To Use Volume To Improve Your Trading.)
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This week we take a look at today's biggest movers worth over $300 million in market cap.
November 25th's Largest Movers
|Perfect World Co., Ltd (Nasdaq:PWRD)||+7.16%|
|Star Scientific, Inc. (Nasdaq:CIGX)||+7.50%|
|Royal Bank of Scotland (NYSE:RBS)||+8.21%|
|Korea Electric Power Corp. (NYSE:KEP)||+7.03%|
Perfect World Co., Ltd. (Market Cap= $459.9M)
This company through its subsidiaries, operates as an online game developer and operator in China. Trading at a 0.3 PEG ratio, and a low 3.94 P/E to the industry average of 12.7, it seems cheap. The P/E ratio is one of the most common metrics used in valuing stocks, taking the company's current share price and dividing it by its per-share earnings. A high P/E in comparison to its peers can indicate that it is overvalued, and vice versa. The ratio can also be referred to as the price multiple or earnings multiple. Right now its converting a lot of its sales to profits, as we can see reflected in its 30.3% profit margin, and 33.14% operating margins.
Star Scientific, Inc. (Market Cap= $356.6M)
CIGX engages in the development, implementation, and licensing of tobacco curing technology. Lacking a P/E ratio due to negative earnings this past year, this company seems to have trouble making a profit when the industry average P/E is 17.3. It's PEG ratio is also non-existant but would be calculated by taking the future price-to-earnings ratio and divide it by the expected annual EPS growth. Typically a ratio close to 1 means the company is fairly valued to its growth potential, with anything less than 1 reflecting undervaluation, and anything above 1 indicating the stock is overvalued. In this case lacking a PEG ratio is a warning sign. Additionally, we can see why Star Scientific is trading without a P/E, as its operating margin is sitting at a -2,361.9%.
Royal Bank of Scotland (Market Cap= $31.5B)
This company through its subsidiaries, offers banking and financial services to personal, commercial, corporate, and institutional customers in the United Kingdom, the United States and internationally. Trading without a P/E, this company seems to be on the risky side. But with its 0.07 forward P/E ratio indicates the company may be undervalued. Its profit margins are -0.82% while its operating margins are 10.28%. These are important metrics to use when comparing companies in similar industries. A higher profit margin compared to its peers means the company has better control over its costs and can put more dollars per unit of sales towards its bottom line. A higher operating margin compared to its peers means the company has more revenue left over after paying for variable costs of production, which the company can use towards paying its fixed costs such as interest on debt.
Korea Electric Power Corp. (Market Cap = $13.2 Billion)
KEP is an integrated electric utility company in Korea. With an enticing PEG ratio of 0.10 but with negative earnings it doesn't look good compared to the industry average P/E of 14.6. Its profit margin is -2.98% and its operating margin is 0.29% so this company is certainly losing more than what it takes in. Hopefully it can reverse its losses before it runs out of cash or else this could spell trouble for KEP. (For more on the P/E, see How To Use The P/E Ratio And PEG To Tell A Stock's Future.)
The Bottom Line
No matter the economic climate, Wall Street will always have stocks that make major moves each week. Paying close attention to the previous ratios will help you identify key times adjust your strategy.
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