This morning has been good for the market, with the Nasdaq increasing 0.8%, the S&P 500 moving up 0.8% and the Dow rising 0.9%. The Nasdaq Composite Index represents all the stocks that trade on the Nasdaq stock market.
The biggest movers traded on the NASDAQ so far are:
|Company||Market Cap||Percentage Change|
|Splunk (Nasdaq:SPLK)||$2.92 billion||+17%|
|Zumiez (Nasdaq:ZUMZ)||$1.01 billion||-9.9%|
|Facebook Inc. - Class (Nasdaq:FB)||$40.89 billion||-3.7%|
|Clayton Williams Energy (Nasdaq:CWEI)||$574.6 million||+3.4%|
|VistaPrint (Nasdaq:VPRT)||$1.27 billion||-2.7%|
|Randgold Resources Ltd (Nasdaq:GOLD)||$9 billion||+2.5%|
|Royal Gold (Nasdaq:RGLD)||$4.95 billion||+2.4%|
Investopedia Markets: Explore the best one-stop source for financial news
Splunk (Nasdaq:SPLK) is currently at $35.69 per share after a dramatic increase of 17%. The company's volume for the day so far is 2.3 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. SPLK has a P/B ratio of 15.25 which 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: Using The Price-To-Book Ratio To Evaluate Companies
At $29.04, Zumiez (Nasdaq:ZUMZ) has slipped 9.9%. With 2.3 million shares changing hands so far today, the company's volume is 3.5 times the current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. The P/E ratio for ZUMZ is 25.4, above the industry average of 17.63. This could mean that the market is expecting big things over the next few months or years. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Understanding The P/E Ratio
Facebook Inc. - Class (Nasdaq:FB) is currently trading at a share price of $18.39, a 3.7% decline. So far today, the company's volume is 28.6 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. 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. 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. FB's debt ratio of 10.8% is on the low side. 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.
Rising 3.4%, Clayton Williams Energy (Nasdaq:CWEI) is currently trading at $48.85 per share. So far today, the company's volume is 6,589 shares, 0.2 times the current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. 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 CWEI is a high 1.4. 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 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.
Currently trading at $36.28 per share, VistaPrint (Nasdaq:VPRT) has fallen 2.7%. The company is currently trading a volume of 168,503 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 allow the investor to make a quick determination as to a company's investment value. The capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. VPRT has a capitalization ratio of 54.7%, which is on the high end. 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.
Randgold Resources Ltd (Nasdaq:GOLD) has moved up 2.5% and is currently trading at $100.42 per share. The company's volume for the day so far is 327,115 shares, 0.9 times its average over the past 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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). PEG ratio for GOLD is 2.31. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Royal Gold (Nasdaq:RGLD) is at $86.17 per share after an increase of 2.4%. The company is trading at a volume of 211,010 shares. The trading volume for a stock indicates the level of investor interest. 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. The P/B ratio for RGLD is 2.71, 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.