The market is having a bad day so far: the Nasdaq is down 0.3%; the S&P 500 has fallen 0.3%; and the Dow has decreased 0.4%.
The Real Estate Operations sector (IYR) is down 0.3%, outperforming the market overall. Currently, the biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Zillow Inc (Nasdaq:Z)||$1.15 billion||-2.3%|
|Jones Lang LaSalle Incorporated (NYSE:JLL)||$3.03 billion||-1.4%|
|Realty Income Corp (NYSE:O)||$5.62 billion||-1.3%|
|Entertainment Properties Trust (NYSE:EPR)||$1.96 billion||-1.1%|
|American Capital Agency Corp. (Nasdaq:AGNC)||$10.28 billion||+0.8%|
|Alexandria Real Estate Equities Inc (NYSE:ARE)||$4.56 billion||-0.8%|
|Boston Properties (NYSE:BXP)||$16.51 billion||-0.8%|
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Zillow (Nasdaq:Z) is trading at $38.85 per share, down 2.3%. With 74,952 shares changing hands so far today, the company's volume is 0.2 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. Z's gross profit margin of 94.9% 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. Z has an operating profit margin of 7.4% and a net profit margin of 4.7%, both high compared to its gross profit margin.
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. Z's P/S ratio of 13.18 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 compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
Currently trading at $68.19 per share, Jones Lang LaSalle (NYSE:JLL) has fallen 1.4%. The company's volume for the day so far is 50,816 shares. Yesterday, 232,361 shares changed hands. 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. 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. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). JLL has a P/E ratio of 17.4, high compared to the industry average of 15.27. This could mean that the market is expecting big things over the next few months or years. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After a decline of 1.3%, Realty (NYSE:O) has hit a share price of $41.55. At 395,909 shares, the company's volume so far today is 0.6 times its current daily average. 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. 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 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. O's capitalization ratio is 42.9%. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
Falling 1.1%, Entertainment (NYSE:EPR) is currently at a share price of $41.45. So far today, the company's volume is 90,210 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. EPR has a P/B ratio of 1.34 which 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: How Buybacks Warps The Price-To-Book Ratio
Rising 0.8%, American Capital (Nasdaq:AGNC) is currently trading at $34.55 per share. The company's volume is currently 1.8 million shares for the day, 0.3 times its average over the past three months. 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. AGNC has a high dividend yield of 14.6%. This could mean either that the stock is underpriced or that the company has fallen on hard times and future dividends will not be as high as previous ones. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Dividend Yield For The Downturn
Alexandria Real Estate Equities (NYSE:ARE) is currently trading at a share price of $72.81, a 0.8% decline. So far today, the company's volume is 28,297 shares. This is less trading activity than there was yesterday. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. ARE's debt ratio of 49.7% is on the low side. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. However, one thing to note with this ratio: it isn't a pure measure of a company's debt (or indebtedness), as it also includes operational liabilities, such as accounts payable and taxes payable.
Boston Properties (NYSE:BXP) has decreased to $109.31 per share, a 0.8% fall. The company's volume is currently 108,138 shares for the day, 0.1 times the average daily volume. If a stock price moves on high volume, this means that the change is a significant one. 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. BXP's D/E ratio of 160% is on the high side. This shows that the company's assets are financed primarily through debt. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. 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.