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Tickers in this Article: VECO, PANL, BRCM, CREE, SWKS, UTEK, MLNX
The market is having a bad day so far: the Nasdaq has slipped 2%; the S&P 500 has decreased 1.7%; and the Dow is down 1.3%.

The Semiconductors sector (XLK) is down 1.9%, outperforming the market overall. Currently, the biggest movers in the sector are:
CompanyMarket CapPercentage Change
Veeco Instruments Inc. (Nasdaq:VECO).32 billion-7.5%
Universal Display Corporation (Nasdaq:PANL).5 billion-5.3%
Broadcom (Nasdaq:BRCM).94 billion-5.2%
Cree, Inc. (Nasdaq:CREE).84 billion-5%
Skyworks Solutions Inc (Nasdaq:SWKS).09 billion-5%
Ultratech, Inc. (Nasdaq:UTEK)4.6 million-4.7%
Mellanox Technologies, Ltd. (Nasdaq:MLNX).75 billion-4.6%
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Veeco Instruments (Nasdaq:VECO) is currently trading at a share price of $31.52, a 7.5% decline. The company's volume for the day so far is 371,899 share, 0.6 times the average volume over the last three months. A stock's volume conveys how excited investors are about it. 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. VECO's gross profit margin is 43.2%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. VECO has an operating profit margin of 15%. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. Net margin is 10.6%.

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 can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. VECO has a PEG ratio of 0.98, 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.

Slipping 5.3%, Universal (Nasdaq:PANL) is currently trading at $30.65 per share. This morning, the company's volume is 190,213 shares. This is 0.2 times the average daily volume. 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. 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. PANL has a high gross profit margin of 85.7%. This may indicate that the company is over-pricing its products and/or services. The operating profit margin is a rough measure of the operating leverage a company can achieve in the conduct of the operational part of its business. PANL has an operating profit margin of -12.3%. This shows that the company reported a net operating loss in the most recent quarter. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company has a net profit margin of 21.5%, high compared to its gross profit margin. A high net profit margin means a company is able to control its costs that buy goods and services at prices significantly higher than it costs to produce or provide them.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. PANL's stock is trading for more than its book value with a P/B ratio of 4.19. 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: Using The Price-To-Book Ratio To Evaluate Companies

Broadcom (Nasdaq:BRCM) has decreased to $32.61 per share, a 5.2% fall. So far today, 3.5 million shares have changed hands, while it was 9.2 million shares yesterday. Volume indicates the level of interest that investors have in a company at its current price. Margin ratios highlight companies that are worth further examination. BRCM has a gross profit margin of 53.2%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. With an operating profit margin of 2.7%, BRCM has a high one relative to its gross profit margin. A high operating margin indicates a high margin of safety in an investment. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. The company has a net profit margin of 10.6%.

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. 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. BRCM has a dividend yield of 1.2%, which is fairly low. If you are an income investor, this stock may not be attractive to you. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Due Diligence On Dividends

Cree (Nasdaq:CREE) has fallen 5% and is currently trading at $23.23 per share. So far today, 939,301 shares have 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. 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. The gross profit margin for CREE is 47.1%. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. Operating profit margin for CREE is 1.8%. Net profit margins are those generated from all phases of a business, including taxes. The company's net profit margin is 4.9%.

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/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. CREE has a high P/S ratio of 3.34. 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 keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.

Falling 5%, Skyworks Solutions (Nasdaq:SWKS) is currently at a share price of $25.52. At 1.6 million shares, the company's volume so far today is 0.4 times its average over the past three months. 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. SWKS' gross profit margin is 47.7%. 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. SWKS' operating profit margin is 12%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. Net margin is 13.6%.

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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. SWKS' debt ratio of 14.3% 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.

After a decline of 4.7%, Ultratech (Nasdaq:UTEK) has hit a share price of $29.61. So far today, the company's volume is 43,617 shares. This is 0.3 times its average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for UTEK is 55.9%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. Operating profit margin for UTEK is 22.7%. Net profit margin is calculated by dividing net income by sales. The company has a net profit margin of 19.4%.

Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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 UTEK is 20.1, below the industry average of 35.28. A low P/E ratio may indicate that the market expects relatively slower earnings growth. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: Profit With The Power Of Price-To-Earnings

At $66.13, Mellanox (Nasdaq:MLNX) has slipped 4.6%. So far today, the company's volume is 399,557 shares, below yesterday's volume of 1.4 million 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. 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. MLNX has a gross profit margin of 72.6%. MLNX has an operating profit margin of 14.9% and a net profit margin of 8.2%, 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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). MLNX's PEG ratio is 5.3. 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.

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. 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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