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Tickers in this Article: IHS, SWN, AREX, SDT, HP, BRY, NGLS
It's been a bad day for the market after the morning's trading. The Nasdaq has slipped 0.1%; the S&P 500 has slipped 0.1%; and the Dow has decreased 0.2%. The energy sector is the category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. Performance in the sector is largely driven by the supply and demand for worldwide energy. Energy producers will do very well during times of high oil and gas prices, but will earn less when the value of energy drops. Furthermore, this sector is sensitive to political events, which historically have driven changes in the price of oil.

The Energy sector (XLE) is currently lagging behind the overall market, down 0.1%, and its current biggest movers are:
CompanyMarket CapPercentage Change
Natural Resource Partners LP (NYSE:NRP)$2.29 billion-6%
CGG Veritas (ADR) (NYSE:CGV)$3.99 billion+5.4%
Cimarex Energy Co. (NYSE:XEC)$4.57 billion+3.7%
Baytex Energy Corp (USA) (NYSE:BTE)$4.98 billion-3%
Concho Resources Inc. (NYSE:CXO)$8.95 billion+2.8%
CNOOC Limited (ADR) (NYSE:CEO)$86.43 billion+2.7%
Southwestern Energy (NYSE:SWN)$11.21 billion-2.5%
Software Summary: Stock Screener

Natural Resource (NYSE:NRP) is currently trading at a share price of $20.30, a 6% decline. So far today, the company's volume is 350,193 shares, above yesterday's volume of 152,607 shares. If a stock price makes a big move up or down, volume lets us know the significance of that 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. NRP has a high gross profit margin of 99.8%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. 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 has a net profit margin of 15.6%, high compared to its gross profit margin. Investors in companies with high profit margins can be confident that even if sales dip slightly, profits will remain strong. A company's operating margin is calculated by dividing operating income by revenues. NRP's operating profit margin is 70.6%.

Valuation ratios allow the investor to make a quick determination as to a company's investment value. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). NRP has a P/E ratio of 39.4, high compared to the industry average of 4.72. 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: The P/E Ratio: A Good Market-Timing Indicator

CGG Veritas (NYSE:CGV) has increased to a share price of $27.72, a 5.4% rise. This morning, the company is trading a volume of 155,540 shares. This is 2.3 times its current three-month average. 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. 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. CGV's gross profit margin is 37.2%. 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. CGV has an operating profit margin of 6.8%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. Net profit margin for the company is 0.2%.

Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. CGV's D/E ratio is 64%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Cimarex (NYSE:XEC) is at $55.32 per share after an increase of 3.7%. So far today, the company's volume is 584,159 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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. XEC has a relatively high gross profit margin of 80.8%. This may indicate that the company is over-pricing its products and/or services. Net profit margin compares net income with sales. With a net profit margin of 29.5%, the company has a high one compared to its gross profit margin. A high net profit margin means a company is able to control its costs that buy goods and services at prices significantly higher than it costs to produce or provide them. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. XEC's operating profit margin is 39%.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. The P/B ratio for XEC is 1.47, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. 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

Baytex Energy Corp (NYSE:BTE) is down 3% to reach $40.34 per share. The company's volume is currently 240,369 shares for the day, 1.2 times the average daily volume. 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. BTE's gross profit margin is 48.6%. Investors trying to assess a company's ability to continue to pay its fixed expenses even if its business declines may want to evaluate the operating margin ratio. BTE has an operating profit margin of 20.9%. Net profit margin is a good ratio for determining how a company is performing. Net margin is 19.3%.

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. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. BTE's dividend yield is 6.3%. 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: Investment Valuation Ratios: Dividend Yield

Concho Resources (NYSE:CXO) is up 2.8% to reach a current price of $88.46 per share. So far today, the company's volume is 360,478 shares. This is below yesterday's volume of 955,067 shares. A stock's volume conveys how excited investors are about it. Margin ratios highlight companies that are worth further examination. CXO has a gross profit margin of 81.3%, which is on the high end. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Compared with its gross profit margin, CXO's operating profit margin of 17.2% and net profit margin of 28.4% are high.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for CXO is a high 5.61. 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 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.

CNOOC Limited (NYSE:CEO) is currently trading at $198.73 per share, a 2.7% increase. So far today, the company's volume is 90,513 shares, 0.7 times its current three-month average. 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. 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 debt ratio is calculated by dividing total liabilities by total assets. CEO has a low debt ratio of 31.6%. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Falling 2.5%, Southwestern Energy (NYSE:SWN) is currently at a share price of $31.32. This morning, the company is trading a volume of 2.3 million shares. 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. 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. SWN has a gross profit margin of 68.4%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. The company's net profit margin is 20.8%.

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. 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. SWN has a PEG ratio of 1.54, 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.

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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