The market has been doing well after the morning's trading. The Nasdaq is up 0.7%; the S&P 500 has moved up 0.7%; and the Dow has climbed 0.6%. 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.
Underperforming the market overall, the Financial sector (XLF) is up 0.7%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|KB Financial Group, Inc. (ADR) (NYSE:KB)||$12.51 billion||+5.5%|
|Sabine Royalty Trust (NYSE:SBR)||$745.7 million||+4.4%|
|Triangle Capital Corporation (NYSE:TCAP)||$660.9 million||-4.4%|
|Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG)||$16.76 billion||+2.9%|
|Virtus Investment Partners Inc (Nasdaq:VRTS)||$638.4 million||+2.7%|
|BlackRock (NYSE:BLK)||$30.46 billion||+2.3%|
|Affiliated Managers Group, Inc. (NYSE:AMG)||$5.68 billion||+1.7%|
Broker Summary: E-Trade Financial
KB Financial Group, Inc (NYSE:KB) is at $34.16 per share after an increase of 5.5%. So far today, 58,030 shares of the company's stock have changed hands. This is greater than yesterday's volume of 53,021 shares. 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. KB's PEG ratio is 0.51. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Sabine (NYSE:SBR) has risen 4.4% and is currently trading at $53.42 per share. With 19,781 shares changing hands so far today, the company's volume is 0.9 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. SBR's stock is trading for more than its book value with a P/B ratio of 118.71. This may be a sign that the company is overvalued. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Using The Price-To-Book Ratio To Evaluate Companies
At $23.18, Triangle (NYSE:TCAP) has slipped 4.4%. The company's volume for the day so far is 269,754 shares. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. Relative to the industry P/E ratio of 10.46, TCAP's 8.6 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
After rising 2.9%, Shinhan Financial Group Co., Ltd (NYSE:SHG) is currently trading at a share price of $72.76. The company's volume is currently 5,535 shares for the day, 0.2 times the average daily volume. 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. 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. The P/S ratio for SHG is a high 1.18. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Increasing 2.7%, Virtus Investment Partners (Nasdaq:VRTS) is trading at $84.20 per share. The company is trading at a volume of 7,255 shares. Trading activity is down from yesterday when 23,181 shares changed hands. 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. 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. 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. VRTS' P/B ratio of 2.92 shows that its share price is higher than its book value. 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. P/B value comparisons should be made among companies in the same industry rather than across industries. SEE: Investment Valuation Ratios: Price/Book Value Ratio
After an increase of 2.3%, BlackRock (NYSE:BLK) has reached a current price of $173.49. The company's volume for the day so far is 232,400 share, 0.2 times its current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. The P/E ratio for BLK is 13.5, below the industry average of 16.08. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?
Affiliated Managers Group (NYSE:AMG) has increased to a share price of $112.40, a 1.7% rise. The company is currently trading a volume of 126,339 shares. 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. Margin ratios highlight companies that are worth further examination. AMG has a gross profit margin of 58%. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. AMG's operating profit margin is 26%. Net profit margin compares net income with sales. Net margin is 9.6%.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/sales ratio measures a company's stock market price by its revenues. AMG has a high P/S ratio of 3.41. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.