The market is currently up, with the Nasdaq climbing 2.2%, the S&P 500 increasing 2% and the Dow up 1.8%. 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 up 2.2%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Mercadolibre Inc (Nasdaq:MELI)||$2.94 billion||+24.1%|
|M\x2FA-COM Technology Solutions Holdings (Nasdaq:MTSI)||$757.4 million||-22.5%|
|Active Network Inc (NYSE:ACTV)||$816.1 million||-17.6%|
|OpenTable Inc (Nasdaq:OPEN)||$770.7 million||+16.7%|
|Linkedin Corporation (NYSE:LNKD)||$9.66 billion||+12%|
|FEI Company (Nasdaq:FEIC)||$1.77 billion||+11%|
|ViaSat, Inc. (Nasdaq:VSAT)||$1.64 billion||-9.5%|
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Mercadolibre (Nasdaq:MELI) rose a significant 24.1% to reach $82.56 per share. The company's volume is currently 1.9 million shares for the day, 2.5 times its average over the past 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 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. 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. MELI has a dividend yield of 0.7%, which is fairly low. This may indicate that the company's stock is overpriced. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor. SEE: Guide To Stock-Picking Strategies: Income Investing
Taking a 22.5% hit, M\x2FA-COM Technology Solutions (Nasdaq:MTSI) is currently trading at $12.95 per share. So far this morning, 351,001 shares have changed hands. This is 12.9 times the average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for MTSI is 0.52, which is relatively low. Low P/S ratios can indicate unrecognized value potential - so long as other criteria like high profit margins, low debt levels and growth prospects are in place. 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.
Active Network (NYSE:ACTV) is at a share price of $11.50 after a sharp decline of 17.6%. At 571,024 shares, the company's volume so far today is more than yesterday's 223,571 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. The debt ratio shows the proportion of assets that a company is financing through debt. ACTV has a low debt ratio of 44.6%. 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.
OpenTable (Nasdaq:OPEN) is currently at $39.87 per share after a dramatic increase of 16.7%. So far today, the company's volume is 2.3 million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). Compared to the industry average of 22.74, OPEN's P/E ratio of 38.6 is quite high. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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: Understanding The P/E Ratio
Linkedin (NYSE:LNKD) has soared 12% to reach a current price of $104.70 per share. So far today, the company's volume is 5.2 million shares, 1.9 times the current three-month average. The trading volume for a stock indicates the level of investor interest. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. PEG ratio for LNKD is 13.81. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After a big jump of 11%, FEI (Nasdaq:FEIC) is trading at $51.82 per share. The company's volume for the morning is 564,063 shares. This is 1.9 times its current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. FEIC has a P/B ratio of 2.65 which shows that its share price is higher 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: Investment Valuation Ratios: Price/Book Value Ratio
After a decline of 9.5%, ViaSat (Nasdaq:VSAT) has hit a share price of $34.15. The company's volume is currently 782,350 shares for the day, whereas yesterday, volume was only 213,282 shares. Volume is an important indicator because it indicates how significant a price shift is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/sales ratio measures a company's stock market price by its revenues. VSAT's P/S ratio of 2.4 is on the high side. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Daily stock performance should be weighed against historical performance and put in context of the market overall. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.