The Nasdaq is trading down 0.5%, the S&P 500 has moved little and the Dow has decreased 0.2% so far today. The technology sector is a category of stocks relating to the research, development and/or distribution of technologically based goods and services. This sector contains businesses revolving around the manufacturing of electronics, creation of software, computers or products and services relating to information technology. The technology sector offers a wide arrange of products and services for both customers and other businesses. Consumer goods like personal computers, stereos and televisions are continually improved and upgraded, offering the latest technology to all users. Businesses receive information and services from software and database systems, which allow the companies to make strategic business decisions.
On a quiet day for the market overall so far, the Technology sector (XLK) has slipped 0.3% and its biggest movers are currently:
|Company||Market Cap||Percentage Change|
|ADTRAN, Inc. (Nasdaq:ADTN)||$1.73 billion||-16.3%|
|VeriFone Systems Inc (NYSE:PAY)||$3.44 billion||+9.4%|
|Youku Inc (ADR) (NYSE:YOKU)||$2.17 billion||-8.1%|
|Tudou Hldg Ltd (ADR) (Nasdaq:TUDO)||$831.7 million||-7.7%|
|3D Systems Corporation (NYSE:DDD)||$1.74 billion||-5.1%|
|Proto Labs Inc (NYSE:PRLB)||$717.5 million||+3.8%|
|Sourcefire, Inc. (Nasdaq:FIRE)||$1.34 billion||-3.5%|
Broker Summary: E-Trade Financial
ADTRAN (Nasdaq:ADTN) is at a share price of $22.77 after a sharp decline of 16.3%. So far today, the company's volume is 4.1 million shares, more than yesterday's 2.3 million shares. Volume is used to evaluate how meaningful the price movement of a stock 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. ADTN has a gross profit margin of 59.6%. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. ADTN's operating profit margin is 12%. 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. The company has a net profit margin of 17.1%.
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. ADTN has a fairly low capitalization ratio of 6.1%. 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.
VeriFone Systems (NYSE:PAY) has risen 9.4% to hit a current price of $34.93 per share. So far today, 3.3 million shares have changed hands. This is 1.9 times its current three-month average. Volume is an important indicator because it indicates how significant a price shift is. 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. PAY's gross profit margin is 44.6%. 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 PAY is 7.6%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 14.6%.
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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. Relative to the industry P/E ratio of 63.99, PAY's 14.1 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Profit With The Power Of Price-To-Earnings
Youku Inc (NYSE:YOKU) has decreased to $17.53 per share, a 8.1% fall. The company's volume is currently 968,753 shares for the day, 0.7 times its current daily average. 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. 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. YOKU has a gross profit margin of 54.6%. YOKU's operating and net profit margins are both negative. This is because the company reported a net loss and net operating loss in the most recent quarter.
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/book value ratio is calculated by dividing the current stock price by the company's book value per share. YOKU's stock is trading for more than its book value with a P/B ratio of 3.09. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. 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: Investment Valuation Ratios: Price/Book Value Ratio
Currently trading at $27.08 per share, Tudou Hldg Ltd (Nasdaq:TUDO) has fallen 7.7%. The company is currently trading a volume of 12,040 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. Operating margin for TUDO is -94.6%. This is because the company reported a net operating loss in the most recent quarter.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. TUDO's debt-equity ratio of 8% is on the low end. This shows that the company's assets are financed primarily through equity. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Falling 5.1%, 3D (NYSE:DDD) is currently at a share price of $32.22. The company's volume is currently 399,164 shares for the day, which is less activity than yesterday's volume of 1.6 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. 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 DDD is 53.4%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. DDD has an operating profit margin of 12.8%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net margin is 13.4%.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. DDD has a debt ratio of 47.9%, which is fairly low. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
After rising 3.8%, Proto Labs (NYSE:PRLB) is currently trading at a share price of $31.15. The company is currently trading a volume of 133,293 shares. This is 0.6 times its average volume over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. PRLB has a low capitalization ratio of 0.4%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.
After a decline of 3.5%, Sourcefire (Nasdaq:FIRE) has hit a share price of $43.65. The company's volume is currently 310,586 shares for the day, 0.4 times the 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. 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. FIRE's gross profit margin of 79% is on the high side. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Relative to its gross profit margin, FIRE's operating profit margin of 0.3% and net profit margin of 3.2% are high.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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 FIRE is 228.9, above the industry average of 63.99. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?
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.