Filed Under: ,
Tickers in this Article: GPN, NSM, BNS, HIG, ASPS, BAP, CG
It's been a bad day for the market after the morning's trading. The Nasdaq is trading down 0.8%; the S&P 500 has slipped 0.7%; and the Dow has decreased 0.7%. 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.

The Financial sector (XLF) is currently ahead of the overall market, down only 0.5%, and its biggest movers are currently:
CompanyMarket CapPercentage Change
Global Payments (NYSE:GPN)$3.46 billion-2.9%
Nationstar Mortgage Holdings (NYSE:NSM)$2.93 billion+2.6%
Bank of Nova Scotia (NYSE:BNS)$65.89 billion-2.4%
Hartford Finl (NYSE:HIG)$8.41 billion+2.4%
Altisource Portfolio Solutions (Nasdaq:ASPS)$2.01 billion-2%
Credicorp Ltd (NYSE:BAP)$10.01 billion-1.8%
Carlyle (Nasdaq:CG)$7.87 billion+1.7%
Broker Summary: E-Trade Financial

At $42.54, Global Payments (NYSE:GPN) has slipped 2.9%. The company is trading at a volume of one million shares. Yesterday's volume was only 647,226 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. GPN has a PEG ratio of 1.53, which is consistent with the industry average. While P/E ratios are important indicators of market value, a high P/E in and of itself is not bad because it may indicate a company whose earnings are growing very rapidly, so many investors look at the PEG ratio in order to get an idea of whether or not a particular P/E ratio is justified by underlying earnings growth.

Nationstar Mortgage Holdings (NYSE:NSM) has increased to a share price of $33.73, a 2.6% rise. So far today, the company's volume is 263,928 shares, 0.2 times the average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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 has a P/B ratio of 4.75 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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

Bank of Nova Scotia (NYSE:BNS) has decreased to $54.50 per share, a 2.4% fall. The company's volume for the day so far is 201,052 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. BNS has a dividend yield of 4.2%. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Guide To Stock-Picking Strategies: Income Investing

Rising 2.4%, Hartford Finl (NYSE:HIG) is currently trading at $19.76 per share. So far today, the company's volume is 9.6 million shares, 1.4 times the current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. A price/sales ratio is derived by dividing stock market price by company sales. HIG has a low P/S ratio of 0.34. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

Altisource Portfolio Solutions (Nasdaq:ASPS) is down 2% to reach $84.29 per share. The company's volume for the day so far is 30,523 shares. This is on pace to fall short of yesterday's volume of 145,179 shares. Volume is an important indicator because it indicates how significant a price shift 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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. Compared to the industry average of 10.4, ASPS' P/E ratio of 22.5 is quite high. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Can Investors Trust the P/E Ratio?

Credicorp Ltd (NYSE:BAP) is currently trading at a share price of $123.19, a 1.8% decline. So far today, the company's volume is 31,263 shares, 0.2 times the average daily volume. 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. 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. BAP has a high D/E ratio of 115%. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Carlyle (Nasdaq:CG) has risen 1.7% and is currently trading at $26.28 per share. The company is currently trading a volume of 30,278 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. The P/B ratio for CG is 6.08, indicating that the stock is trading for more 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. 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: Investment Valuation Ratios: Price/Book Value Ratio

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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

comments powered by Disqus

Trading Center