The market is doing well so far today. The Nasdaq is trading up 0.7%; the S&P 500 is up 0.7%; and the Dow has increased 0.6%.
Underperforming the market overall, the Consumer/Non-Cyclical sector (XLP) is up 0.5%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|Vina Concha y Toro S.A. (ADR) (NYSE:VCO)||$1.4 billion||+2.7%|
|McCormick & Co (NYSE:MKC)||$7.61 billion||+2.6%|
|General Mills (NYSE:GIS)||$24.69 billion||-2.6%|
|Monster Beverage Corp (Nasdaq:MNST)||$13.15 billion||-2%|
|Peet\'s Coffee & Tea, Inc. (Nasdaq:PEET)||$738.7 million||-1.8%|
|Lorillard (NYSE:LO)||$16.73 billion||+1.8%|
|Fomento Economico Mexicano SAB (ADR) (NYSE:FMX)||$157.6 billion||-1.7%|
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After an increase of 2.7%, Vina Concha y Toro S.A (NYSE:VCO) has reached a current price of $38.50. The company's volume for the day so far is 1,902 shares. This is more trading activity than there was yesterday. High volume indicates a lot of investor interest while low volume indicates the opposite. Margin ratios highlight companies that are worth further examination. VCO has a gross profit margin of 33.4%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company has a net profit margin of 11.3%, which is low relative to its gross profit margin. Investors in companies with low profit margins need to be concerned that if sales drop, profits will fall sharply as well. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. VCO's operating profit margin is 6.6%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. VCO's stock is trading for more than its book value with a P/B ratio of 1.72. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. 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: Using The Price-To-Book Ratio To Evaluate Companies
McCormick (NYSE:MKC) is currently trading at $58.90 per share, a 2.6% increase. With 371,126 shares changing hands so far today, the company's volume is 0.6 times its current three-month average. 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. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. MKC's gross profit margin is 43.2%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. MKC has an operating profit margin of 12.4%. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. Net profit margin for the company is 9.7%.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). PEG ratio for MKC is 2.3. 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.
Currently trading at $37.17 per share, General Mills (NYSE:GIS) has fallen 2.6%. The company is currently trading a volume of 3.8 million 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 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. GIS has a gross profit margin of 39.6%. 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. Relative to its gross profit margin, GIS' operating margin of 16.2% is on the low side. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. Net margin is 9.6%.
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. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. GIS' P/S ratio of 1.53 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. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
Falling 2%, Monster (Nasdaq:MNST) is currently at a share price of $73.13. At 485,153 shares, the company's volume so far today is 0.3 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. 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. MNST's gross profit margin is 53.8%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. Operating profit margin for MNST is 27.8%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. The company's net profit margin is 17.1%.
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. MNST has a debt ratio of 27.4%, which is fairly low. 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
At $54.75, Peet's Coffee & Tea (Nasdaq:PEET) has slipped 1.8%. The company's volume is currently 50,128 shares. Trading activity is down from yesterday when 187,120 shares changed hands. The trading volume for a stock indicates the level of investor interest. 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. PEET has a low gross profit margin of 19.1%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Relative to its gross profit margin, PEET's operating profit margin of 5.6% and net profit margin of 4.1% are low.
A company's investment value can be 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. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. Compared to the industry average of 19.82, PEET's P/E ratio of 48.1 is quite high. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Investment Valuation Ratios: Price/Earnings Ratio
Lorillard (NYSE:LO) has moved up 1.8% and is currently trading at $130.44 per share. At 259,769 shares, the company's volume so far today is 0.2 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. Margin analysis is a great way to understand the profitability of companies. LO's gross profit margin is 36.5%. Operating margin for LO is 25.7% and net margin is 16.9%, both low relative to its gross margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). LO has a PEG ratio of 1.56, which is consistent with the industry average. 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 1.7%, Fomento Economico Mexicano SAB (NYSE:FMX) is currently trading at $86.56 per share. So far today, the company's volume is 399,142 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. FMX has a gross profit margin of 41.8%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. FMX has an operating profit margin of 9.7%. 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 9.1%.
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. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for FMX is 1.83, which is relatively high. This could be a good sign if the share price increases. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
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