The Nasdaq has declined 0.5%, the S&P 500 remains relatively unchanged and the Dow has slipped 0.2% so far today. 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|
|ADTRAN, Inc. (Nasdaq:ADTN)||$1.73 billion||-16.3%|
|Pharmacyclics, Inc. (Nasdaq:PCYC)||$3.96 billion||-11.6%|
|Healthcare Services Group, Inc. (Nasdaq:HCSG)||$1.32 billion||+5.6%|
|Helen of Troy Limited (Nasdaq:HELE)||$934.3 million||+4.3%|
|Netflix (Nasdaq:NFLX)||$4.45 billion||+3.9%|
|Tractor Supply Company (Nasdaq:TSCO)||$6.02 billion||-3.8%|
|Onyx Pharmaceuticals, Inc. (Nasdaq:ONXX)||$4.34 billion||-3.6%|
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ADTRAN (Nasdaq:ADTN) is at a share price of $22.77 after a sharp decline of 16.3%. So far today, the company's volume is 4.1 million shares, 3.7 times the average daily volume. Volume indicates the level of interest that investors have in a company at its current price. Margin ratios highlight companies that are worth further examination. The gross profit margin for ADTN is 59.6%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). Operating profit margin for ADTN is 12%. Net profit margin is a good ratio for determining how a company is performing. Net margin is 17.1%.
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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. PEG ratio for ADTN is 1.41. 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.
Shares of Pharmacyclics (Nasdaq:PCYC) are currently trading at $50.66, a steep decline of 11.6%. This morning, the company is trading a volume of 1.7 million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. Operating margin for PCYC is -932.1%. In other words, the company reported a net operating loss in the most recent quarter.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. The P/B ratio for PCYC is 24.12, 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: How Buybacks Warps The Price-To-Book Ratio
Healthcare Services Group (Nasdaq:HCSG) has increased to a share price of $20.73, a 5.6% rise. The company's volume is currently 470,838 shares for the day, 1.3 times its current three-month average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. HCSG has a low gross profit margin of 14.1%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. Compared with its gross profit margin, HCSG's operating profit margin of 4.7% and net profit margin of 4.1% are low.
Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. HCSG's P/E ratio of 34.1 is under the industry average of 74.04. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. 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: The P/E Ratio: A Good Market-Timing Indicator
Helen of (Nasdaq:HELE) has risen 4.3% to hit a current price of $30.71 per share. The company's volume for the day so far is 113,850 shares. Trading activity is down from yesterday when 667,041 shares changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. HELE's gross profit margin is 43%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. HELE's operating profit margin is 12.4%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net profit margin for the company is 9.3%.
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/sales ratio measures a company's stock market price by its revenues. The P/S ratio for HELE is 0.87, which is relatively low. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Netflix (Nasdaq:NFLX) is currently trading at $83.36 per share, a 3.9% increase. So far today, the company's volume is 3.1 million shares, 0.6 times its current daily average. A stock's volume conveys how excited investors are about it. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for NFLX is 66.1%. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. NFLX has a negative operating margin of -0.2%. This is because the company reported a net operating loss in the most recent quarter. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. Relative to its gross profit margin, the company has a high net profit margin of 4.8%. A company with a high profit margin has a greater capability to maintain strong earnings during a recession than does a company with a low profit margin, providing investors with a greater margin of safety.
A company's investment value can be 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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for NFLX is 80.9%, which is relatively high. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. 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.
Tractor Supply (Nasdaq:TSCO) has decreased to $80.42 per share, a 3.8% fall. So far today, 355,656 shares have changed hands. 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. TSCO's gross profit margin is 33.2%. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. Operating profit margin for TSCO is 6.3%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. The company's net profit margin is 5.5%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. TSCO's dividend yield of 1% is fairly low. This could indicate that that the stock is overpriced or that future dividends might be higher. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Dividend Yield For The Downturn
Onyx Pharmaceuticals (Nasdaq:ONXX) is currently trading at a share price of $64.95, a 3.6% decline. The company's volume for the day so far is 650,032 share, 0.4 times its average over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. Operating margin for ONXX is -70.5%. This shows that the company reported a net operating loss in the most recent quarter.
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 price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. ONXX has a P/B ratio of 5.35 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. 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: Using The Price-To-Book Ratio To Evaluate 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. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.