This morning has been good for the market, with the Nasdaq increasing 0.8%, the S&P 500 moving up 0.7% and the Dow rising 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|
|Fossil, Inc. (Nasdaq:FOSL)||$4.32 billion||+32.2%|
|BroadSoft Inc (Nasdaq:BSFT)||$766.7 million||+32%|
|NII Holdings, Inc. (Nasdaq:NIHD)||$1.39 billion||-25%|
|Grand Canyon Education Inc (Nasdaq:LOPE)||$718.5 million||+23.2%|
|Scientific Games Corp (Nasdaq:SGMS)||$774.7 million||-20.1%|
|Cepheid (Nasdaq:CPHD)||$2.26 billion||+11%|
|Innophos Holdings, Inc. (Nasdaq:IPHS)||$1.24 billion||-10.2%|
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Fossil (Nasdaq:FOSL) has soared 32.2% to reach a current price of $92.25 per share. So far today, 4.6 million shares have changed hands. Volume is used to evaluate how meaningful the price movement of a stock is. 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 measures the leverage of a company, and a company's leverage is a good way to assess risk. FOSL has a low debt ratio of 28.6%. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. 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 big jump of 32%, BroadSoft (Nasdaq:BSFT) is trading at $36.83 per share. So far today, the company's volume is 4.5 million shares, 4.9 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. BSFT has a D/E ratio of 60%. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
Taking a 25% hit, NII Holdings (Nasdaq:NIHD) is currently trading at $6.06 per share. So far today, the company's volume is 14.2 million shares. The trading volume for a stock indicates the level of investor interest. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for NIHD is 56.4%, which is fairly high. If the company is a company is in a highly competitive business and hobbled by high debt, it will find its competitors taking advantage of its problems to grab more market share. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.
Grand Canyon Education (Nasdaq:LOPE) is trading at $19.89 per share, a significant rise of 23.2%. The company's volume for the day so far is 2.1 million shares, 2.8 times the current three-month average. 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. LOPE's stock is trading for more than its book value with a P/B ratio of 4.86. 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: How Buybacks Warps The Price-To-Book Ratio
Shares of Scientific (Nasdaq:SGMS) are currently trading at $6.67, a steep decline of 20.1%. So far today, the company's volume is three million shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. SGMS' P/S ratio of 1.18 is on the high side. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Cepheid (Nasdaq:CPHD) rose a significant 11% to reach $37.92 per share. The company's volume is currently one million shares for the day, 1.1 times the current daily average. 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. 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 shows the proportion of assets that a company is financing through debt. CPHD's debt ratio of 22.6% is on the low side. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Innophos Holdings (Nasdaq:IPHS) is currently trading at $51.03 per share, after a steep drop of 10.2%. So far today, 518,126 shares of the company's stock have changed hands. Yesterday, volume was only 85,908 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. IPHS has a low debt-equity ratio of 38%. This shows that the company's assets are financed primarily through equity. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
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.