The Nasdaq has moved up 0.3%, the S&P 500 has risen 0.1% and the Dow has increased 0.2% on a good day for the market so far.
The Semiconductors sector (XLK) is up 0.3%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Advantest Corp (NYSE:ATE)||$2.51 billion||-4.1%|
|Cirrus Logic (Nasdaq:CRUS)||$2.79 billion||-4%|
|InvenSense (NYSE:INVN)||$1.01 billion||-2.7%|
|Emulex (NYSE:ELX)||$665.2 million||+1.9%|
|NXP (Nasdaq:NXPI)||$6.3 billion||+1.8%|
|Tower Semiconductor Ltd (Nasdaq:TSEM)||$190.7 million||+1.7%|
|Avago (Nasdaq:AVGO)||$8.63 billion||-1.5%|
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Advantest Corp (NYSE:ATE) has fallen 4.1% and is currently trading at $13.91 per share. This morning, the company is trading a volume of 7,009 shares. Volume is an important indicator because it indicates how significant a price shift is.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. The P/B ratio for ATE is 1.53, indicating that the stock is trading for more 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: Investment Valuation Ratios: Price/Book Value Ratio
After a decline of 4%, Cirrus Logic (Nasdaq:CRUS) has hit a share price of $41.38. At 2.5 million shares, the company's volume so far today is 1.1 times its average over the past three months. Volume indicates the level of interest that investors have in a company at its current price.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. Compared to the industry average of 14.65, CRUS' P/E ratio of 34.2 is quite high. 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: The P/E Ratio: A Good Market-Timing Indicator
Falling 2.7%, InvenSense (NYSE:INVN) is currently at a share price of $12.06. The company's volume for the day so far is 245,887 shares. At this rate, trading activity will likely be down from yesterday when 793,187 shares changed hands. The trading volume for a stock indicates the level of investor interest.
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. INVN's P/S ratio of 5.89 is on the high side. 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.
Emulex (NYSE:ELX) has moved up 1.9% and is currently trading at $7.59 per share. At 263,351 shares, the company's volume so far today is 0.4 times its current daily 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.
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 debt ratio shows the proportion of assets that a company is financing through debt. ELX's debt ratio of 19.3% 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.
NXP (Nasdaq:NXPI) is currently trading at $25.45 per share, a 1.8% increase. So far today, the company's volume is 1.3 million shares. As a stock moves up or down, it is important to pay attention to the trading volume. This indicates the level of interest: the higher the volume, the more the interest.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. NXPI has a D/E ratio of 376%, which is relatively high. This shows that the company's assets are financed primarily through debt. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Tower Semiconductor Ltd (Nasdaq:TSEM) is at $8.30 per share after an increase of 1.7%. So far today, the company's volume is 6,303 shares, 0.1 times the average volume over the last three months. 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. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. TSEM's capitalization ratio of 72.6% is relatively 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. 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.
Avago (Nasdaq:AVGO) has decreased to $34.70 per share, a 1.5% fall. So far today, the company's volume is 332,521 shares. At this rate, trading activity will likely be down from yesterday when 1.4 million shares changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move.
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. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for AVGO is 1.8%, which is on the low end. If you are an income investor, this stock may not be attractive to you. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security.
SEE: Investment Valuation Ratios: Dividend Yield
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.