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Tickers in this Article: EPHC, NSM, GS, VRTS, TCBI, AXP, HUM
It's been a good morning for the market. The Nasdaq has risen 0.2%; the S&P 500 is up 0.2%; and the Dow has climbed 0.3%. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.

Underperforming the market overall, the Financial sector (XLF) is up 0.1%, and these are its current biggest movers:
CompanyMarket CapPercentage Change
Epoch (Nasdaq:EPHC)$500.7 million+3.8%
Nationstar Mortgage Holdings (NYSE:NSM)$2.56 billion+3.2%
Goldman Sachs (NYSE:GS)$51.01 billion+2.5%
Virtus Investment Partners (Nasdaq:VRTS)$689.7 million-2%
Texas Capital Bancshares (Nasdaq:TCBI)$1.8 billion-1.9%
American (NYSE:AXP)$66.44 billion-1.9%
Humana (NYSE:HUM)$11.27 billion+1.8%
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Epoch (Nasdaq:EPHC) is at $22.07 per share after an increase of 3.8%. This morning, the company is trading a volume of 35,001 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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 EPHC is 22.9, below the industry average of 25.09. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio

Increasing 3.2%, Nationstar Mortgage Holdings (NYSE:NSM) is trading at $29.69 per share. The company's volume is currently 800,067 shares for the day, 0.8 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. NSM's P/B ratio of 4.18 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 value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Investment Valuation Ratios: Price/Book Value Ratio

After rising 2.5%, Goldman Sachs (NYSE:GS) is currently trading at a share price of $109.07. The company is trading at a volume of 2.1 million shares. A stock's volume conveys how excited investors are about it. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. GS has a dividend yield of 1.7%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Dividend Yield For The Downturn

Virtus Investment Partners (Nasdaq:VRTS) has fallen 2% and is currently trading at $86.34 per share. The company's volume is currently 9,617 shares for the day, in line with the current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The debt-equity ratio of 10% is relatively low. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

After a decline of 1.9%, Texas Capital Bancshares (Nasdaq:TCBI) has hit a share price of $46.35. The company is currently trading a volume of 208,499 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. TCBI's debt ratio of 92.6% is fairly high. As such, the company is highly leveraged and not highly liquid. 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.

American (NYSE:AXP) has decreased to $57.49 per share, a 1.9% fall. The company's volume for the day so far is 2.8 million shares, 0.7 times the current three-month average. Volume is used to evaluate how meaningful the price movement of a stock is. While investment valuation ratios are useful tools in estimating the attractiveness of an investment, remember that it is important to look at a company's historical performance and compare the company ratios with its competitors and industry overall. The price/sales ratio measures a company's stock market price by its revenues. AXP's P/S ratio of 2.0 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.

Humana (NYSE:HUM) has increased to a share price of $70.98, a 1.8% rise. The company's volume is currently 603,206 shares. This is about the same trading activity as there was yesterday. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. HUM's capitalization ratio is 16.1%, which is relatively low. Low leverage is a significant balance sheet strength, a sign of a less risky investment. 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.

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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