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Tickers in this Article: FIRE, DRIV, VMW, UIS, CLGX, CTXS, CREE
The Nasdaq has slipped 1.5%, the S&P 500 has decreased 0.9% and the Dow is trading down 1%, marking a bad morning for the market. 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.

The Technology sector (XLK) is down 1.3%, outperforming the market overall. Currently, the biggest movers in the sector are:
CompanyMarket CapPercentage Change
Sourcefire, Inc. (Nasdaq:FIRE)$1.57 billion-4.9%
Digital River, Inc. (Nasdaq:DRIV)$561.4 million+4%
VMware (NYSE:VMW)$37.88 billion-4%
Unisys Corporation (NYSE:UIS)$753.3 million+3.7%
CoreLogic Inc. (NYSE:CLGX)$1.83 billion+3.4%
Citrix Systems (Nasdaq:CTXS)$14.99 billion-3.2%
Cree, Inc. (Nasdaq:CREE)$2.84 billion+2.9%
Broker Summary: E-Trade Financial

Sourcefire (Nasdaq:FIRE) is currently trading at a share price of $50.60, a 4.9% decline. So far today, 177,899 shares of the company's stock have changed hands. This is below yesterday's volume of 405,401 shares. Volume indicates the level of interest that investors have in a company at its current price. 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. 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. FIRE's operating margin of 0.3% and net margin of 3.2% are high relative to its gross margin.

When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. FIRE's P/E ratio of 263.2 is above the industry average of 49.93. This could mean that the market is expecting big things over the next few months or years. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: How To Find P/E And PEG Ratios

Digital River (Nasdaq:DRIV) has risen 4% to hit a current price of $15.82 per share. So far today, the company's volume is 241,922 shares, 0.7 times the average daily volume. A stock's volume conveys how excited investors are about it. Margin analysis is a great way to understand the profitability of companies. DRIV's gross profit margin of 82.1% is fairly high. 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, DRIV's operating profit margin of 7% and net profit margin of 3.7% are high.

Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. DRIV has a PEG ratio of 2.88. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

At $85.16, VMware (NYSE:VMW) has slipped 4%. This morning, the company is trading a volume of 1.1 million shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. VMW has a high gross profit margin of 91.9%. This may indicate that the company is over-pricing its products and/or services. VMW has an operating profit margin of 20.6% and a net profit margin of 19.8%, both high compared to its gross profit margin.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. VMW's P/B ratio of 7.0 shows that its share price is higher than its book value. 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. 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: Using The Price-To-Book Ratio To Evaluate Companies

After rising 3.7%, Unisys (NYSE:UIS) is currently trading at a share price of $17.82. The company's volume is currently 473,169 shares for the day, 0.7 times the average volume over the last three months. 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 ratios highlight companies that are worth further examination. UIS has a gross profit margin of 30.7%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. The operating margin for UIS is 6.9%, which is low compared its gross profit margin. 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 5%.

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/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. UIS has a P/S ratio of 0.22, on the low end. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. 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.

Increasing 3.4%, CoreLogic (NYSE:CLGX) is trading at $17.99 per share. The company's volume is currently 894,565 shares. This is greater than yesterday's volume of 615,877 shares. If a stock price moves on high volume, this means that the change is a significant one. 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 company has a negative net profit margin of -5.7%. A negative net profit margin means the company spent more money than it made.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CLGX has a capitalization ratio of 39.2%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Citrix (Nasdaq:CTXS) has fallen 3.2% and is currently trading at $77.91 per share. At 673,174 shares, the company's volume so far today is 0.4 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. 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. CTXS' gross profit margin of 93% is on the high side. 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. CTXS' operating margin of 13.7% and net margin of 15.2% are high relative to its gross margin.

Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. CTXS has a low debt ratio of 33.1%. 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.

Rising 2.9%, Cree (Nasdaq:CREE) is currently trading at $25.17 per share. So far today, the company's volume is 1.9 million shares. 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. 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. CREE has a gross profit margin of 47.1%. 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. CREE's operating profit margin is 1.8%. Net profit margin examines how effectively a company is managed and how profitable it is by looking at how much of each dollar in revenues ultimately hits the company's bottom line. Net profit margin for the company is 4.9%.

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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. Compared to the industry average of 15.53, CREE's P/E ratio of 49.4 is quite high. 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. 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 On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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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