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Tickers in this Article: HMSY, VRTX, AIRM, LPNT, LULU, REGN, MFRM
After a bad morning, the Nasdaq is down 1.5%, the S&P 500 has slipped 0.9% and the Dow has decreased 1%. Most stocks on the Nasdaq Composite Index are technology and Internet-related, but there are financial, consumer, bio-tech and industrial companies as well.

The biggest movers traded on the NASDAQ so far are:
CompanyMarket CapPercentage Change
HMS Holdings Corp. (Nasdaq:HMSY).39 billion+14.1%
Vertex Pharmaceuticals Incorporated (Nasdaq:VRTX).9 billion-10.4%
Air Methods Corporation (Nasdaq:AIRM).15 billion+6.5%
LifePoint Hospitals, Inc. (Nasdaq:LPNT).88 billion+6.3%
Lululemon Athletica inc. (Nasdaq:LULU).59 billion-5.8%
Regeneron Pharmaceuticals Inc (Nasdaq:REGN).82 billion-4.8%
Mattress Firm Holding Corp (Nasdaq:MFRM)5.1 million+4.2%
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After a big jump of 14.1%, HMS (Nasdaq:HMSY) is trading at $31.71 per share. So far today, 3.2 million shares of the company's stock have changed hands. Yesterday, volume was only 545,646 shares. Volume indicates the level of interest that investors have in a company at its current price. Margin analysis is a great way to understand the profitability of companies. HMSY has a gross profit margin of 42.5%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. HMSY's operating profit margin is 14.9%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company's net profit margin is 11.6%.

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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. HMSY's P/E ratio of 52.5 is above the industry average of 45.41. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: The P/E Ratio: A Good Market-Timing Indicator

After a precipitous drop of 10.4%, Vertex Pharmaceuticals (Nasdaq:VRTX) is now trading at a share price of $54.75. The company's volume for the day so far is nine million shares. If a stock price moves on high volume, this means that the change is a significant one. 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. VRTX has a gross profit margin of 93.4%, which is on the high end. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. VRTX's operating margin of 20.9% and net margin of 16.7% are high relative to its gross margin.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. The P/B ratio for VRTX is 12.41, indicating that the stock is trading for more 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. 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: Investment Valuation Ratios: Price/Book Value Ratio

After rising 6.5%, Air (Nasdaq:AIRM) is currently trading at a share price of $95.23. With 168,003 shares changing hands so far today, the company's volume is 1.4 times its current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. AIRM has a gross profit margin of 40%. The operating profit margin indicates how much EBIT is generated per dollar of sales. Operating profit margin for AIRM is 13.1%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. The company has a net profit margin of 7.4%.

Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. The D/E ratio for AIRM is 184%. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

LifePoint Hospitals (Nasdaq:LPNT) has moved up 6.3% and is currently trading at $40.88 per share. The company's volume for the day so far is 702,135 shares. This is 2.1 times the current daily average. 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. Margin ratios highlight companies that are worth further examination. LPNT's gross profit margin is 38.8%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. LPNT has an operating profit margin of 10.7%. 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 5.9%.

In making a decision about a potential or existing investment, valuation ratios are useful as a basis for seeing whether the stock price is too high, reasonable, or a bargain. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. LPNT has a low P/S ratio of 0.64. The lower the P/S ratio, the more reasonably price the stock, all else being equal. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

Lululemon Athletica (Nasdaq:LULU) has fallen 5.8% and is currently trading at $58.26 per share. This morning, 3.3 million shares have been traded, above yesterday's volume of 2.3 million shares. 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. The gross profit margin for LULU is 59.2%. Investors trying to assess a company's ability to continue to pay its fixed expenses even if its business declines may want to evaluate the operating margin ratio. LULU's operating profit margin is 25.6%. Net profit margin is calculated by dividing net income by sales. Net margin is 17.9%.

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. The debt ratio for LULU is a low 13.3%. 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.

After a decline of 4.8%, Regeneron Pharmaceuticals (Nasdaq:REGN) has hit a share price of $108.30. This morning, the company is trading a volume of 377,628 shares. 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. The company has a net profit margin of -29.5%. A negative net profit margin means the company spent more money than it made.

Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. REGN's capitalization ratio is 35.7%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

After an increase of 4.2%, Mattress (Nasdaq:MFRM) has reached a current price of $28.23. The company's volume for the day so far is 164,398 share, 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. Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. The P/E ratio for MFRM is 19.3, above the industry average of 16.35. This could mean that the market is expecting big things over the next few months or years. 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: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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.

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