On a good day for the market, the Nasdaq is up 2.2%, the S&P 500 has increased 2% and the Dow has climbed 1.8%. The recent surge in popularity of technological stocks has launched the Nasdaq Composite Index into the spotlight, making it one of the premier indexes in the world.
The biggest movers traded on the NASDAQ so far are:
|Company||Market Cap||Percentage Change|
|Mercadolibre Inc (Nasdaq:MELI)||$2.94 billion||+24.1%|
|M/FFA-COM Technology Solutions Holdings (Nasdaq:MTSI)||$757.4 million||-22.5%|
|COMSCORE, Inc. (Nasdaq:SCOR)||$544.3 million||-22.3%|
|OpenTable Inc (Nasdaq:OPEN)||$770.7 million||+16.7%|
|FEI Company (Nasdaq:FEIC)||$1.77 billion||+11%|
|ViaSat, Inc. (Nasdaq:VSAT)||$1.64 billion||-9.5%|
|Approach Resources Inc. (Nasdaq:AREX)||$897.5 million||-8.4%|
Forex Broker Summary: Forex Capital Markets (FXCM)
Mercadolibre (Nasdaq:MELI) has soared 24.1% to reach a current price of $82.56 per share. So far today, 1.9 million shares have changed hands, which is more trading activity than there was yesterday. Volume indicates the level of interest that investors have in a company at its current price.
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/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. MELI's P/B ratio of 15.35 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets.
SEE: Using The Price-To-Book Ratio To Evaluate Companies
After a precipitous drop of 22.5%, M\x2FA-COM Technology Solutions (Nasdaq:MTSI) is now trading at a share price of $12.95. So far today, the company's volume is 351,001 shares. This is 12.9 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite.
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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. MTSI has a low P/S ratio of 0.52. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
COMSCORE (Nasdaq:SCOR) is currently trading at $12 per share, after a steep drop of 22.3%. This morning, the company is trading a volume of 760,940 shares. 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.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. SCOR has a debt ratio of 39.3%, which is fairly low. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. 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.
OpenTable (Nasdaq:OPEN) is currently at $39.87 per share after a dramatic increase of 16.7%. So far today, the company's volume is 2.3 million shares, 3.7 times its current daily average. Volume is an important indicator because it indicates how significant a price shift is.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. OPEN has a P/B ratio of 7.59 which shows that its share price is higher 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. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets.
SEE: How Buybacks Warps The Price-To-Book Ratio
FEI (Nasdaq:FEIC) is trading at $51.82 per share, a significant rise of 11%. The company is trading at a volume of 564,063 shares. This is greater than yesterday's volume of 558,061 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.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. FEIC has a P/E ratio of 17.7, high compared to the industry average of 14.63. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. 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: Understanding The P/E Ratio
ViaSat (Nasdaq:VSAT) has fallen 9.5% and is currently trading at $34.15 per share. The company's volume is currently 782,350 shares for the day, four times its average over the past three months. Volume is used to evaluate how meaningful the price movement of a stock is.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. VSAT has a PEG ratio of 6.61. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Approach Resources (Nasdaq:AREX) is trading at $24.52 per share, down 8.4%. The company is currently trading a volume of 840,206 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.
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. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. The P/S ratio for AREX is 10.44, which is relatively high. This could be a good sign if the share price increases. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.