On a good day for the market, the Nasdaq has risen 0.7%, the S&P 500 has increased 0.7% and the Dow is trading up 0.6%.
The Services sector (IYC) is up 0.2%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Dollar Tree (Nasdaq:DLTR)||$12.87 billion||-50.8%|
|O\'Reilly Automotive, Inc. (Nasdaq:ORLY)||$12.16 billion||-16.2%|
|UniFirst Corp (NYSE:UNF)||$1.14 billion||+9.3%|
|Zillow Inc (Nasdaq:Z)||$957.4 million||+6.7%|
|Heartland Payment Systems, Inc. (NYSE:HPY)||$1.08 billion||+5.3%|
|Monro Muffler Brake Inc (Nasdaq:MNRO)||$1.03 billion||-5.1%|
|AutoZone (NYSE:AZO)||$14.09 billion||-5%|
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Shares of Dollar Tree (Nasdaq:DLTR) are currently trading at $54.62, a steep decline of 50.8%. The company's volume for the day so far is 520,021 shares. Yesterday, 855,134 shares changed hands. If a stock price moves on high volume, this means that the change is a significant one. 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. DLTR has a gross profit margin of 38.3%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. DLTR's operating profit margin is 10.9%. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. Net margin is 7.4%.
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. 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 DLTR is 1.73, which is relatively high. 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.
O'Reilly Automotive, Inc (Nasdaq:ORLY) is currently trading at $80.86 per share, after a steep drop of 16.2%. So far today, the company's volume is 7.3 million shares, 6.6 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. 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. The gross profit margin for ORLY is 52.3%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. ORLY has an operating profit margin of 16.2%. 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's net profit margin is 9.3%.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for ORLY is 50.1%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
UniFirst (NYSE:UNF) is at $62.73 per share after an increase of 9.3%. The company's volume for the day so far is 109,860 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. UNF has a gross profit margin of 36.2%. 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. UNF's operating profit margin is 9.9%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. Net profit margin for the company is 6.8%.
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-equity (D/E) ratio is a leverage ratio. UNF has a low debt-equity ratio of 12%. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Zillow (Nasdaq:Z) is currently trading at $35.45 per share, a 6.7% increase. The company's volume for the day so far is 163,640 share, 0.3 times the average volume over the last three months. 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. 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. Z has a high gross profit margin of 94.9%. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. Relative to its gross profit margin, Z's operating profit margin of 7.4% and net profit margin of 4.7% are high.
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. 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. The P/B ratio for Z is 9.51, indicating that the stock is trading for more 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: How Buybacks Warps The Price-To-Book Ratio
After an increase of 5.3%, Heartland Payment Systems (NYSE:HPY) has reached a current price of $29.29. So far today, 184,729 shares of the company's stock have changed hands. This is less trading activity than there was yesterday. The trading volume for a stock indicates the level of investor interest. Margin analysis is a great way to understand the profitability of companies. HPY has a low gross profit margin of 14.7%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Relative to its gross profit margin, HPY's operating profit margin of 4.9% and net profit margin of 2.5% 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. The dividend yield is calculated by dividing a company's dividends per share by its stock price. The dividend yield for HPY is 0.9%, which is on the low end. This may indicate that the company's stock is overpriced. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Due Diligence On Dividends
Monro Muffler Brake (Nasdaq:MNRO) is trading at $31.68 per share, down 5.1%. The company's volume is currently 481,425 shares for the day, 1.8 times the average daily volume. 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. 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 MNRO is 43.7%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. MNRO has an operating profit margin of 10.2%. 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. Net margin is 8%.
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. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for MNRO is a high 1.87. 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.
AutoZone (NYSE:AZO) has decreased to $357.70 per share, a 5% fall. So far today, 904,614 shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. AZO's gross profit margin is 53.9%. 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. AZO's operating profit margin is 20.2%. Net profit margin is a good ratio for determining how a company is performing. The company has a net profit margin of 10.7%.
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 debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. AZO's debt ratio of 123% is fairly high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. 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.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
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