On a good day for the market, the Nasdaq has climbed 1%, the S&P 500 is up 1.3% and the Dow has risen 1.3%.
Outperforming the market overall, the Services sector (IYC) is up 1% and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|Bridgepoint Education, Inc. (NYSE:BPI)||$679.9 million||-25.4%|
|Coinstar, Inc. (Nasdaq:CSTR)||$2.1 billion||-5.6%|
|Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT)||$24.27 billion||-4.7%|
|PriceSmart, Inc. (Nasdaq:PSMT)||$2.02 billion||+2.8%|
|Telefonica Brasil SA (ADR) (NYSE:VIV)||$27.54 billion||-2.6%|
|Liberty Media Corp (Capital) (Nasdaq:LMCA)||$9.85 billion||+2.6%|
|Panera Bread Co (Nasdaq:PNRA)||$4.27 billion||+2.5%|
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Bridgepoint Education (NYSE:BPI) is at a share price of $9.67 after a sharp decline of 25.4%. At 4.3 million shares, the company's volume so far today is 2.9 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. 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. BPI has a gross profit margin of 73.5%. Compared with its gross profit margin, BPI's operating profit margin of 20.9% and net profit margin of 15.9% are high.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. BPI's P/E ratio of 4.8 falls below the industry average of 16.87. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Can Investors Trust the P/E Ratio?
Coinstar (Nasdaq:CSTR) has decreased to $63.23 per share, a 5.6% fall. So far today, 1.4 million shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 CSTR is 31.8%. Relative to its gross profit margin, CSTR's operating profit margin of 13.8% and net profit margin of 7.5% are low.
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. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. The capitalizion ratio of 23.3% is on the low end. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. 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.
Chunghwa Telecom Co., Ltd (NYSE:CHT) is down 4.7% to reach $29.83 per share. So far today, the company's volume is 41,131 shares, which is less activity than yesterday's volume of 181,858 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 analysis is a great way to understand the profitability of companies. CHT's gross profit margin is 52.4%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. CHT's operating profit margin is 20.4%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. The company has a net profit margin of 20.9%.
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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. CHT's stock is trading for more than its book value with a P/B ratio of 1.81. 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. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: How Buybacks Warps The Price-To-Book Ratio
PriceSmart (Nasdaq:PSMT) has increased to a share price of $68.70, a 2.8% rise. So far today, 56,547 shares have changed hands. This is 0.1 times the current three-month average. The trading volume for a stock indicates the level of investor interest. Margin ratios highlight companies that are worth further examination. PSMT has a low gross profit margin of 17.3%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Compared with its gross profit margin, PSMT's operating profit margin of 5% and net profit margin of 3.2% are low.
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. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for PSMT is 0.9%, which is on the low end. A company with a low dividend yield may be a safer investment in the long run. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Investment Valuation Ratios: Dividend Yield
Slipping 2.6%, Telefonica Brasil SA (NYSE:VIV) is currently trading at $23.84 per share. At 579,764 shares, the company's volume so far today is 0.4 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. VIV's gross profit margin is 64.3%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. Operating profit margin for VIV is 18.4%. Net profit margin is calculated by dividing net income by sales. Net margin is 14.6%.
While investment valuation ratios are useful tools in estimating the attractiveness of an investment, remember that it is important to look at a company's historical performance and compare the company ratios with its competitors and industry overall. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for VIV is a high 1.82. This could be a good sign if the share price increases. 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.
After rising 2.6%, Liberty Media Corp (Nasdaq:LMCA) is currently trading at a share price of $91.93. So far today, the company's volume is 452,132 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. 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. LMCA's gross profit margin of 86% 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. Relative to its gross profit margin, LMCA's operating profit margin of 20.2% and net profit margin of 26.2% are high.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for LMCA is a low 25.2%. A low debt ratio means the company has more available cash flow. 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.
Panera (Nasdaq:PNRA) is at $147.15 per share after an increase of 2.5%. This morning, 228,147 shares have been traded, whereas yesterday, volume was only 203,230 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. PNRA has a low gross profit margin of 23%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. PNRA's operating margin of 13.5% and net margin of 7.6% are low relative to its gross margin.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. 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 PNRA is 29.4, above the industry average of 21.1. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. 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: Understanding The P/E Ratio
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.