The market is currently up, with the Nasdaq moving up 0.1%, the S&P 500 rising 0.2% and the Dow climbing 0.3%. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.
The Financial sector (XLF) is up 0.3%, outperforming the market overall. The biggest movers in the sector so far are:
|Company||Market Cap||Percentage Change|
|XL Group (NYSE:XL)||$6.66 billion||+7.3%|
|Primerica, Inc. (NYSE:PRI)||$1.63 billion||+5.9%|
|Encore Capital Group, Inc. (Nasdaq:ECPG)||$743 million||-5%|
|Verisk Analytics, Inc. (Nasdaq:VRSK)||$7.82 billion||+3.1%|
|Carlyle Group LP (Nasdaq:CG)||$7.45 billion||-3%|
|Credit Acceptance Corp. (Nasdaq:CACC)||$2.48 billion||+2.3%|
|Westpac Banking Corporation (ADR) (NYSE:WBK)||$75.98 billion||+2.1%|
Software Summary: Finviz.com Stock Screener
After an increase of 7.3%, XL (NYSE:XL) has reached a current price of $22.94. This morning, the company is trading a volume of 3.7 million shares. A stock's volume conveys how excited investors are about it. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. XL has a low debt-equity ratio of 17%. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Primerica (NYSE:PRI) is currently trading at $28.77 per share, a 5.9% increase. The company's volume is currently 130,444 shares for the day, in keeping with the average volume over the past three months. Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made a strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move. A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). PRI's P/E ratio of 11.9 is under the industry average of 15.44. A low P/E ratio may indicate that the market expects relatively slower earnings growth. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: The P/E Ratio: A Good Market-Timing Indicator
Encore Capital Group (Nasdaq:ECPG) is down 5% to reach $28.45 per share. So far today, the company's volume is 274,669 shares. This is 2.1 times its current daily average. Volume indicates the level of interest that investors have in a company at its current price. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. ECPG's capitalization ratio of 63.5% is relatively high. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
Verisk Analytics (Nasdaq:VRSK) has moved up 3.1% and is currently trading at $48.58 per share. The company's volume is currently 475,715 shares for the day, on pace to finish the day below yesterday's volume of 1.4 million shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. While investment valuation ratios are useful tools in estimating the attractiveness of an investment, remember that it is important to look at a company's historical performance and compare the company ratios with its competitors and industry overall. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). PEG ratio for VRSK is consistent with the industry average at 1.96. While P/E ratios are important indicators of market value, a high P/E in and of itself is not bad because it may indicate a company whose earnings are growing very rapidly, so many investors look at the PEG ratio in order to get an idea of whether or not a particular P/E ratio is justified by underlying earnings growth.
Carlyle (Nasdaq:CG) has decreased to $23.74 per share, a 3% fall. So far today, the company's volume is 70,101 shares. As a stock moves up or down, it is important to pay attention to the trading volume. This indicates the level of interest: the higher the volume, the more the interest. Valuation ratios like the price to earnings (P/E) ratio, the price to earnings growth (PEG) ratio, the price to sales (P/S) ratio, the price to book (P/B) ratio, and the dividend yield are useful in determining how attractive a potential or existing investment is. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. The P/B ratio for CG is 7.71, indicating that the stock is trading for more than its book value. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Rising 2.3%, Credit (Nasdaq:CACC) is currently trading at $103.53 per share. The company's volume for the day so far is 10,351 shares, 0.4 times its average over the past three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. A company's value as an investment is more easily estimated using valuation ratios such as the price to earnings (P/E) ratio, the price to earnings growth (PEG) ratio, the price to sales (P/S) ratio, the price to book (P/B) ratio, and the dividend yield. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. CACC's P/S ratio of 3.66 is on the high side. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
After rising 2.1%, Westpac Banking Corporation (NYSE:WBK) is currently trading at a share price of $127.95. So far this morning, 16,298 shares have changed hands. This is in line with its current daily average. If a stock price moves on high volume, this means that the change is a significant one. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. WBK's debt ratio of 93.4% is fairly high. This means that most of the company's assets are financed through debt. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.