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Tickers in this Article: CRZO, PWE, AREX, OAS, SM, MPC, ROSE
The morning has been good for the market. The Nasdaq has moved up 1.2%; the S&P 500 has risen 0.6%; and the Dow has increased 0.7%.

Outperforming the market overall, the Oil and Gas Operations sector (DIG) is up 1.5% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Carrizo Oil & Gas, Inc. (Nasdaq:CRZO)$1 billion+4.2%
Penn West Petroleum Ltd (USA) (NYSE:PWE)$6.22 billion-3.7%
Approach Resources Inc. (Nasdaq:AREX)$924 million+3.7%
Oasis Petroleum Inc. (NYSE:OAS)$2.44 billion+3.6%
SM Energy Co. (NYSE:SM)$3.31 billion+3.3%
Marathon Petroleum Corp (NYSE:MPC)$15.49 billion+3.2%
Rosetta Resources Inc. (Nasdaq:ROSE)$2.22 billion+3%
Broker Summary: OptionsXpress Online Trading Platform

Increasing 4.2%, Carrizo Oil & Gas (Nasdaq:CRZO) is trading at $26.43 per share. So far today, the company's volume is 478,782 shares, 0.5 times the average daily volume. 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. Margin analysis is a great way to understand the profitability of companies. CRZO has a relatively high gross profit margin of 83%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Operating margin for CRZO is 27.6% and net margin is 19%, both high relative to its gross margin.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. CRZO has a high D/E ratio of 166%. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Penn West Petroleum Ltd (NYSE:PWE) has fallen 3.7% and is currently trading at $12.62 per share. This morning, the company is trading a volume of 956,483 shares. Volume is an important indicator because it indicates how significant a price shift is. 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. The gross profit margin for PWE is 54.3%. 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. PWE has an operating profit margin of 12.8%. Net profit margin is a good ratio for determining how a company is performing. The company has a net profit margin of 11.7%.

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 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. PWE has a low capitalization ratio of 27.3%. Low leverage is a significant balance sheet strength, a sign of a less risky investment. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Approach Resources (Nasdaq:AREX) has increased to a share price of $28.58, a 3.7% rise. The company's volume for the day so far is 197,379 share, 0.4 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. 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 has a high gross profit margin of 80.8%. This may indicate that the company is over-pricing its products and/or services. AREX has an operating profit margin of 22% and a net profit margin of 6.3%, both high compared to its gross profit margin.

Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. Compared to the industry average of 17.94, AREX's P/E ratio of 109.4 is quite high. This could mean that the market is expecting big things over the next few months or years. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Understanding The P/E Ratio

Oasis Petroleum (NYSE:OAS) has risen 3.6% to hit a current price of $27.19 per share. So far today, the company's volume is 239,470 shares. Trading activity is down from yesterday when 1.1 million shares changed hands. 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 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. OAS' gross profit margin of 90% is fairly high. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Net profit margin compares net income with sales. The company's net margin of 25% is high relative to its gross profit margin. Investors in companies with high profit margins can be confident that even if sales dip slightly, profits will remain strong. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). Operating profit margin for OAS is 42%.

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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. OAS' PEG ratio is 0.67. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

After rising 3.3%, SM (NYSE:SM) is currently trading at a share price of $53.35. So far today, the company's volume is 561,191 shares, 0.5 times its current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. 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. SM has a gross profit margin of 72.5%. Compared with its gross profit margin, SM's operating profit margin of 14.9% and net profit margin of 17.5% are high.

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 measures the leverage of a company, and a company's leverage is a good way to assess risk. SM has a debt ratio of 61.2%, which is on the high side. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Rising 3.2%, Marathon (NYSE:MPC) is currently trading at $46.91 per share. So far today, the company's volume is 1.2 million shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. MPC has a low gross profit margin of 14.1%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. MPC's operating margin of 4.7% and net margin of 3% are low relative to its gross margin.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The dividend yield is calculated by dividing a company's dividends per share by its stock price. MPC has a dividend yield of 2.2%. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Guide To Stock-Picking Strategies: Income Investing

Rosetta Resources (Nasdaq:ROSE) is at $43.24 per share after an increase of 3%. So far today, the company's volume is 848,947 shares, 0.4 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. ROSE's gross profit margin of 86.5% is on the high side. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Operating margin for ROSE is 35.4% and net margin is 24.1%, both high relative to its gross margin.

Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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 ROSE is a high 5.52. 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. 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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