The market is on the rise so far this morning. The Nasdaq has increased 1%; the S&P 500 has climbed 0.5%; and the Dow is trading up 0.6%. The Nasdaq Composite Index is a capitalization-weighted index, with each company weighted in proportion to its market value.
The biggest movers traded on the NASDAQ so far are:
|Company||Market Cap||Percentage Change|
|Changyou.com Limited(ADR) (Nasdaq:CYOU)||$1.02 billion||+15.7%|
|Sohu.com Inc. (Nasdaq:SOHU)||$1.32 billion||+14.8%|
|Cognizant Technology (Nasdaq:CTSH)||$17.62 billion||+11.7%|
|SINA Corporation (USA) (Nasdaq:SINA)||$2.96 billion||+8.1%|
|MTS Systems Corporation (Nasdaq:MTSC)||$797.7 million||+6.4%|
|Stratasys, Inc. (Nasdaq:SSYS)||$1.36 billion||+5.1%|
|F5 Networks, Inc. (Nasdaq:FFIV)||$7.37 billion||+4.5%|
Broker Summary: E-Trade Financial
After a big jump of 15.7%, Changyou.com (Nasdaq:CYOU) is trading at $22.42 per share. The company's volume for the day so far is 1.1 million shares. Volume indicates the level of interest that investors have in a company at its current price. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. CYOU's P/B ratio of 2.03 shows that its share price is higher than its book value. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Sohu.com (Nasdaq:SOHU) is trading at $39.84 per share, a significant rise of 14.8%. So far today, 1.8 million shares have changed hands, which is more trading activity than there was yesterday. If a stock is trading on low volume, then there is not much interest in the stock. On the other hand, if a stock is trading on high volume, then there is a lot of interest in the stock. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). The P/E ratio for SOHU is 10.1, below the industry average of 45.86. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Profit With The Power Of Price-To-Earnings
Cognizant (Nasdaq:CTSH) has soared 11.7% to reach a current price of $64.63 per share. So far today, 5.3 million shares have changed hands. This is two times the current three-month average. The trading volume for a stock indicates the level of investor interest. Valuation ratios include 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. PEG ratio for CTSH is 1.06. 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.
Increasing 8.1%, SINA Corporation (Nasdaq:SINA) is trading at $48.18 per share. At 1.9 million shares, the company's volume so far today is 0.9 times the current daily average. The trading volume for a stock indicates the level of investor interest. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. SINA's P/S ratio of 8.81 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.
MTS (Nasdaq:MTSC) has increased to a share price of $52.68, a 6.4% rise. This morning, the company is trading a volume of 64,860 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio shows the proportion of assets that a company is financing through debt. MTSC's debt ratio of 47.1% is on the low side. A low debt ratio means the company has more available cash flow. However, one thing to note with this ratio: it isn't a pure measure of a company's debt (or indebtedness), as it also includes operational liabilities, such as accounts payable and taxes payable.
Stratasys (Nasdaq:SSYS) is up 5.1% to reach a current price of $66.88 per share. This morning, 128,583 shares have been traded, while it was 382,883 shares yesterday. Price change alone is not enough to know how a stock is doing. Volume is an important secondary indicator used to confirm trends suggested by price movement. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. SSYS has a P/B ratio of 7.53 which shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Using The Price-To-Book Ratio To Evaluate Companies
F5 Networks (Nasdaq:FFIV) is at $96.91 per share after an increase of 4.5%. This morning, the company is trading a volume of 757,908 shares. This is 0.4 times the average volume over the last three months. Volume is an important indicator because it indicates how significant a price shift is. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. FFIV's P/E ratio of 27.0 is above the industry average of 20.08. This could mean that the market is expecting big things over the next few months or years. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: The P/E Ratio: A Good Market-Timing Indicator
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.