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Tickers in this Article: QCOR, AKRX, MDVN, VRTX, FMS, UTHR, BAX
This morning's trading has marked a bad day for the market so far. The Nasdaq has slipped 1%; the S&P 500 has fallen 0.5%; and the Dow is trading down 0.2%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.

The Healthcare sector (XLV) is currently ahead of the overall market, down only 0.1%, and its biggest movers are currently:
CompanyMarket CapPercentage Change
Questcor Pharmaceuticals (Nasdaq:QCOR)$1.15 billion-5%
Akorn (Nasdaq:AKRX)$1.14 billion+2.7%
Medivation (Nasdaq:MDVN)$4 billion-2.7%
Vertex Pharmaceuticals (Nasdaq:VRTX)$12.14 billion-2.1%
Fresenius Medical Care AG & Co (NYSE:FMS)$21.37 billion+2.1%
United (Nasdaq:UTHR)$2.97 billion-1.9%
Baxter (NYSE:BAX)$33.29 billion-1.6%
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Questcor Pharmaceuticals (Nasdaq:QCOR) is trading at $18.33 per share, down 5%. With 3.9 million shares changing hands so far today, the company's volume is 0.2 times the current three-month average. Volume is used to evaluate how meaningful the price movement of a stock is. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. QCOR has a PEG ratio of 0.23. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Akorn (Nasdaq:AKRX) has increased to a share price of $12.37, a 2.7% rise. The company is currently trading a volume of 1.2 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. 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. AKRX has a P/B ratio of 6.95 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Currently trading at $52.79 per share, Medivation (Nasdaq:MDVN) has fallen 2.7%. So far today, the company's volume is 297,139 shares, which is likely to result in less activity than yesterday's volume of 887,721 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. A price/sales ratio is derived by dividing stock market price by company sales. MDVN has a high P/S ratio of 30.57. This could be a good sign if the share price increases. 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.

Vertex Pharmaceuticals (Nasdaq:VRTX) has decreased to $55.09 per share, a 2.1% fall. This morning, the company's volume is 595,555 shares. This is 0.4 times the average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. VRTX has a debt ratio of 60.2%, which is on the high side. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Fresenius Medical Care AG & Co (NYSE:FMS) has risen 2.1% and is currently trading at $72.55 per share. The company's volume for the day so far is 40,171 shares, 0.8 times its current three-month average. The trading volume for a stock indicates the level of investor interest. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. FMS' P/E ratio of 17.6 falls below the industry average of 41.39. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. 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: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

United (Nasdaq:UTHR) is down 1.9% to reach $56.40 per share. So far today, the company's volume is 137,903 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt-equity (D/E) ratio is a leverage ratio. UTHR has a debt-equity ratio of 27%, which is on the low side. 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.

Baxter (NYSE:BAX) has fallen 1.6% and is currently trading at $59.85 per share. At 2.2 million shares, the company's volume so far today is. 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. 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. BAX's PEG ratio is 1.79. 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.

The Bottom Line The nature of the market is such that stocks will have good days and bad days. Daily stock performance should be weighed against historical performance and put in context of the market overall. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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