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Tickers in this Article: INVN, RVBD, PLCM, ACOM, ALTR, SWI, UIS
Currently, the Nasdaq is down 0.8%, the S&P 500 has slipped 0.2% and the Dow is trading up 0.4%. 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.

These are the biggest movers in the Technology sector (XLK) (+0.5%):
CompanyMarket CapPercentage Change
InvenSense Inc (NYSE:INVN)$747.8 million+26.2%
Riverbed Technology, Inc. (Nasdaq:RVBD)$2.31 billion+23.7%
Polycom Inc (Nasdaq:PLCM)$1.62 billion-14.9%
Ancestry.com Inc (Nasdaq:ACOM)$1.16 billion+14.5%
Altera (Nasdaq:ALTR)$9.9 billion+14.3%
SolarWinds, Inc. (NYSE:SWI)$3.07 billion+14.1%
Unisys Corporation (NYSE:UIS)$727 million+13.3%
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InvenSense (NYSE:INVN) is trading at $11.60 per share, a significant rise of 26.2%. The company's volume for the day so far is 3.2 million shares. Yesterday, volume was only 1.3 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. INVN has a PEG ratio of 1.06, which is consistent with the industry average. 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.

Riverbed Technology (Nasdaq:RVBD) is currently at $18 per share after a dramatic increase of 23.7%. With 12.3 million shares changing hands so far today, the company's volume is 2.7 times the average volume over the last three months. The trading volume for a stock indicates the level of investor interest. 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. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for RVBD is 5.97, which is relatively high. 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.

Shares of Polycom (Nasdaq:PLCM) are currently trading at $7.75, a steep decline of 14.9%. So far today, 7.4 million shares have changed hands. 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 a 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for PLCM is a low 25%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After a big jump of 14.5%, Ancestry.com (Nasdaq:ACOM) is trading at $31.18 per share. The company's volume is currently 1.6 million shares for the day, 3.9 times the average daily volume. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. ACOM's stock is trading for more than its book value with a P/B ratio of 4.19. This may be a sign that the company is overvalued. 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

Altera (Nasdaq:ALTR) rose a significant 14.3% to reach $35.05 per share. So far today, the company's volume is 8.4 million shares. This is greater than yesterday's volume of 3.6 million shares. Volume is used to evaluate how meaningful the price movement of a stock is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). The P/E ratio for ALTR is 15.2, below the industry average of 18.0. 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: Understanding The P/E Ratio

SolarWinds (NYSE:SWI) is currently at $47.31 per share after a dramatic increase of 14.1%. The company's volume is currently 1.7 million shares for the day, 2.6 times the current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. SWI's PEG ratio is 2.31. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Unisys (NYSE:UIS) has soared 13.3% to reach a current price of $18.80 per share. The company is currently trading a volume of 1.4 million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. The P/S ratio for UIS is 0.22, which is relatively low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.

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