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Tickers in this Article: ANR, REXX, CNX, WLT, AREX, APC, NGLS
Currently, the Nasdaq is unchanged, the S&P 500 is trading down 0.1% and the Dow has decreased 0.3%. The energy sector is the category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. Performance in the sector is largely driven by the supply and demand for worldwide energy. Energy producers will do very well during times of high oil and gas prices, but will earn less when the value of energy drops. Furthermore, this sector is sensitive to political events, which historically have driven changes in the price of oil.

The Energy sector (XLE) has fallen 0.1% despite little change in the market overall. The biggest movers in the sector so far are:
CompanyMarket CapPercentage Change
Alpha Natural Resources, Inc. (NYSE:ANR)$1.68 billion-12.3%
Rex Energy Corporation (Nasdaq:REXX)$633.9 million+5%
Consol Energy (NYSE:CNX)$7.2 billion-3.5%
Walter Energy, Inc. (NYSE:WLT)$2.35 billion-3.5%
Approach Resources Inc. (Nasdaq:AREX)$884.4 million+2.8%
Anadarko Petroleum (NYSE:APC)$34.38 billion+2.4%
Targa Resources Partners LP (NYSE:NGLS)$3.46 billion+2.3%
Broker Summary: E-Trade Financial

Alpha Natural Resources, Inc (NYSE:ANR) is currently trading at $6.69 per share, after a steep drop of 12.3%. So far today, 11.9 million shares have changed hands. Price change alone is not enough to know how a stock is doing. Volume is an important secondary indicator used to confirm trends suggested by price movement. 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. ANR has a low gross profit margin of 18.7%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. The operating and net profit margins for ANR are both negative. This is because the company reported net and operating losses in the most recent quarter.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt-equity (D/E) ratio is a leverage ratio. ANR has a debt-equity ratio of 40%, which is on the low side. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.

Rex (Nasdaq:REXX) has risen 5% to hit a current price of $12.60 per share. The company's volume for the day so far is 593,954 share, 0.7 times the current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. The gross profit margin for REXX is 65.9%. Net profit margin compares net income with sales. Net profit margin is -7.5%. This shows that the company reported a net loss in the most recent quarter.

Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. The capitalization ratio for REXX is 35.4%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Consol (NYSE:CNX) is trading at $30.54 per share, down 3.5%. This morning, the company's volume is 1.5 million shares. This is 0.4 times its current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. CNX has a gross profit margin of 38.1%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. CNX has an operating profit margin of 8.3%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. The company's net profit margin is 8.8%.

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. 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. CNX's stock is trading for more than its book value with a P/B ratio of 1.84. 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

Walter Energy (NYSE:WLT) is currently trading at a share price of $36.34, a 3.5% decline. This morning, 1.1 million shares have been traded, while it was 2.7 million shares yesterday. The trading volume for a stock indicates the level of investor interest. Margin analysis is a great way to understand the profitability of companies. WLT's gross profit margin is 37.4%. The operating profit margin indicates how much EBIT is generated per dollar of sales. WLT has an operating profit margin of 13.3%, which is low relative to its gross profit margin. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. The company has a net profit margin of 11%.

When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. The P/E ratio for WLT is 7.7, above the industry average of 4.72. This could mean that the market is expecting big things over the next few months or years. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Profit With The Power Of Price-To-Earnings

Rising 2.8%, Approach Resources (Nasdaq:AREX) is currently trading at $27.14 per share. The company is currently trading a volume of 100,312 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. AREX's gross profit margin of 80.8% is fairly high. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. AREX has an operating profit margin of 22% and a net profit margin of 6.3%, both high compared to its gross profit margin.

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 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 AREX is 5.28. 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.

After an increase of 2.4%, Anadarko (NYSE:APC) has reached a current price of $70.47. At 2.7 million shares, the company's volume so far today is 0.5 times the average volume over the last three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift 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. APC's gross profit margin is 50.2%. With an operating profit margin of 78.4%, APC has a low one relative to its gross profit margin.

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. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for APC is 0.5%, which is on the low end. If you are an income investor, this stock may not be attractive to you. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Dividend Yield For The Downturn

Increasing 2.3%, Targa Resources (NYSE:NGLS) is trading at $39.64 per share. So far this morning, 118,072 shares have changed hands. This is 0.4 times the 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. Margin ratios highlight companies that are worth further examination. NGLS has a low gross profit margin of 10.2%. 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, NGLS' operating profit margin of 6.7% and net profit margin of 3.4% are low.

A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for NGLS is 0.53, which is relatively low. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. 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 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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