The Nasdaq has risen 0.2%, the S&P 500 is up 0.1% and the Dow is trading down 0.1% this morning. 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|
|DXP Enterprises, Inc. (Nasdaq:DXPE)||$586.1 million||-9.9%|
|Apollo Group (Nasdaq:APOL)||$3.92 billion||+8.5%|
|ValueClick Inc (Nasdaq:VCLK)||$1.26 billion||-8%|
|Methanex Corporation (USA) (Nasdaq:MEOH)||$2.54 billion||-5.1%|
|Volterra Semiconductor Corporation (Nasdaq:VLTR)||$626 million||-4.7%|
|Mercadolibre Inc (Nasdaq:MELI)||$3.08 billion||+4.6%|
|Sanderson Farms, Inc. (Nasdaq:SAFM)||$1.15 billion||-4.4%|
Broker Summary: TD Ameritrade Thinkorswim
DXP Enterprises (Nasdaq:DXPE) has fallen 9.9% and is currently trading at $37.27 per share. So far today, 203,640 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 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. DXPE's gross profit margin is 29.9%. 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. With an operating profit margin of 7.9%, DXPE has a low one relative to its gross profit margin. Net profit margin is a good ratio for determining how a company is performing. The company's net profit margin is 4.2%.
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 provides a way of evaluating whether a stock is relatively cheap or expensive. DXPE's stock is trading for more than its book value with a P/B ratio of 3.13. 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. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: How Buybacks Warps The Price-To-Book Ratio
After an increase of 8.5%, Apollo (Nasdaq:APOL) has reached a current price of $35.23. At six million shares, the company's volume so far today is 3.1 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. 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. The gross profit margin for APOL is 59.9%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. APOL has an operating profit margin of 11%. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. The company has a net profit margin of 13.4%.
A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). The P/E ratio for APOL is 7.4, below the industry average of 16.04. A low P/E ratio may indicate that the market expects relatively slower earnings growth. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio
At $14.35, ValueClick (Nasdaq:VCLK) has slipped 8%. The company is trading at a volume of 1.8 million shares. Yesterday, volume was only 1.2 million shares. Volume is an important indicator because it indicates how significant a price shift is. 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. VCLK's gross profit margin is 58.1%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. Operating profit margin for VCLK is 19.9%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. Net margin is 17.7%.
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 price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PEG ratio for VCLK is 0.76. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Slipping 5.1%, Methanex Corporation (Nasdaq:MEOH) is currently trading at $25.73 per share. So far today, the company's volume is 639,962 shares, 1.7 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. Margin analysis is a great way to understand the profitability of companies. MEOH has a low gross profit margin of 19.6%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Compared with its gross profit margin, MEOH's operating profit margin of 8.9% and net profit margin of 7.1% are low.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. Dividend yield measures the income that a stock will generate for an investor. MEOH's dividend yield is 2.7%. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Investment Valuation Ratios: Dividend Yield
Falling 4.7%, Volterra (Nasdaq:VLTR) is currently at a share price of $23.53. The company's volume for the day so far is 326,501 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 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. 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. VLTR's gross profit margin is 59.2%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. VLTR has an operating profit margin of 14.6%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company's net profit margin is 14.7%.
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. A price/sales ratio is derived by dividing stock market price by company sales. VLTR has a high P/S ratio of 5.32. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Rising 4.6%, Mercadolibre (Nasdaq:MELI) is currently trading at $73 per share. At 277,896 shares, the company's volume so far today is 0.6 times its current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. MELI has a relatively high gross profit margin of 77.9%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. The company's net margin of 25.6% is high relative to its gross profit margin. 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. The operating profit margin is a rough measure of the operating leverage a company can achieve in the conduct of the operational part of its business. Operating profit margin for MELI is 29.8%.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt ratio shows the proportion of assets that a company is financing through debt. MELI has a debt ratio of 36.9%, which is fairly low. 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.
Sanderson Farms (Nasdaq:SAFM) has decreased to $47.92 per share, a 4.4% fall. The company's volume for the day so far is 163,242 shares. This is less trading activity than there was yesterday. 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. SAFM has a low gross profit margin of 2.8%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Operating margin for SAFM is 6.9% and net margin is -2.8%, both low relative to its gross margin.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. SAFM has a debt-equity ratio of 37%, which is on the low side. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. 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.