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Tickers in this Article: NXY, TLM, CWEI, SM, CLR, PXD, CEO
On a bad day for the market, the Nasdaq has decreased 1.9%, the S&P 500 has declined 1.3% and the Dow is down 1.1%. 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) is down 1.5%, outperforming the market overall. Currently, the biggest movers in the sector are:
CompanyMarket CapPercentage Change
Nexen Inc. (USA) (NYSE:NXY)$9.03 billion+51%
Talisman Energy Inc. (USA) (NYSE:TLM)$11.25 billion+6.7%
Clayton Williams Energy, Inc. (Nasdaq:CWEI)$609.8 million-6.5%
SM Energy Co. (NYSE:SM)$3.4 billion-4.6%
Continental Resources, Inc. (NYSE:CLR)$13.78 billion-4.1%
Pioneer Natural Res (NYSE:PXD)$11.41 billion-3.8%
CNOOC Limited (ADR) (NYSE:CEO)$90.57 billion-3.8%
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Nexen Inc (NYSE:NXY) is currently at $25.76 per share after a dramatic increase of 51%. So far today, the company's volume is 87.2 million shares, 29.6 times the current daily average. The trading volume for a stock indicates the level of investor 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 capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. NXY has a capitalization ratio of 33.1%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Rising 6.7%, Talisman Energy Inc (NYSE:TLM) is currently trading at $11.63 per share. The company's volume for the day so far is 7.2 million shares. A stock's volume conveys how excited investors are about it. 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. 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. TLM has a PEG ratio of 2.55, 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.

Clayton Williams Energy (Nasdaq:CWEI) is currently trading at a share price of $46.88, a 6.5% decline. The company's volume for the day so far is 39,893 shares, in keeping with the average volume over the past three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 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. CWEI's P/B ratio of 1.62 shows that its share price is higher 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. 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: How Buybacks Warps The Price-To-Book Ratio

Slipping 4.6%, SM (NYSE:SM) is currently trading at $50.51 per share. The company's volume is currently 399,067 shares. This is on pace to fall short of yesterday's volume of 1.2 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. The dividend yield for SM is 0.2%, which is on the low end. This may indicate that the company's stock is overpriced. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor. SEE: Due Diligence On Dividends

Continental Resources (NYSE:CLR) has decreased to $72.90 per share, a 4.1% fall. The company's volume is currently 664,878 shares for the day, in keeping with its current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. The P/S ratio for CLR is 8.13, 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.

Pioneer Natural Res (NYSE:PXD) is trading at $89.23 per share, down 3.8%. This morning, the company is trading a volume of 1.2 million shares. If a stock price moves on high volume, this means that the change is a significant one. 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. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for PXD is 51.5%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

CNOOC Limited (NYSE:CEO) has fallen 3.8% and is currently trading at $195.10 per share. At 67,895 shares, the company's volume so far today is consistent with its average over the last three months. 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The debt-equity ratio of 14% is relatively low. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

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. 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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