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Tickers in this Article: HOS, PAC, LFL, GLF, TGP, CP, ALK
On a bad day for the market, the Nasdaq has slipped 1.7%, the S&P 500 is down 1.3% and the Dow is trading down 1.4%. The transportation sector is a category of stocks relating to the transportation of goods or customers. It is made up of airlines, railroads and trucking companies. The performance of the transportation sector is sensitive to the price of oil. Because operations revolve around the use of vehicles, fuel prices represent a significant cost to transportation companies. As the price of oil rises, transportation companies will be expected to earn less. Inversely, these companies do well when the cost of fuel decreases.

The Transportation sector (IYT) is down 1.2%, outperforming the market overall. Currently, the biggest movers in the sector are:
CompanyMarket CapPercentage Change
Golar LNG Limited (USA) (Nasdaq:GLNG)$3 billion+3.7%
GATX Corporation (NYSE:GMT)$1.85 billion-2.8%
Spirit Airlines Incorporated (Nasdaq:SAVE)$1.45 billion+2.6%
Genesee & Wyoming Inc. (NYSE:GWR)$3.02 billion-2.2%
Westinghouse Air Brake Technologies Corp (NYSE:WAB)$3.77 billion-2.2%
CH Robinson Worldwide (Nasdaq:CHRW)$9.99 billion-2.1%
Copa Holdings, S.A. (NYSE:CPA)$3.58 billion-2%
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Golar LNG Limited (Nasdaq:GLNG) is at $38.69 per share after an increase of 3.7%. The company's volume is currently 385,679 shares for the day, 0.4 times its current three-month average. The trading volume for a stock indicates the level of investor interest. Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. The P/E ratio for GLNG is 61.1, above the industry average of 6.72. This could mean that the market is expecting big things over the next few months or years. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Find P/E And PEG Ratios

GATX (NYSE:GMT) has fallen 2.8% and is currently trading at $38.42 per share. The company is trading at a volume of 45,747 shares. This is below yesterday's volume of 224,013 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin ratios highlight companies that are worth further examination. GMT's gross profit margin is 46.5%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. Relative to its gross profit margin, GMT's operating margin of 33.2% is on the low side. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. The company's net profit margin is 9.2%.

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 company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. GMT's capitalization ratio of 73.7% is relatively high. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

Rising 2.6%, Spirit Airlines (Nasdaq:SAVE) is currently trading at $21.96 per share. So far today, the company's volume is 294,495 shares, 0.3 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. 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. SAVE has a gross profit margin of 43%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. The operating margin for SAVE is 21.4%, which is low compared its gross profit margin. 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 8.1%.

Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. SAVE's stock is trading for more than its book value with a P/B ratio of 3.24. 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

Genesee & Wyoming (NYSE:GWR) has decreased to $53.58 per share, a 2.2% fall. So far today, the company's volume is 38,782 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. GWR has a relatively high gross profit margin of 84.3%. 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, GWR's operating profit margin of 19.9% and net profit margin of 14.2% are high.

Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for GWR is 57.2%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After a decline of 2.2%, Westinghouse Air Brake (NYSE:WAB) has hit a share price of $76.56. So far today, the company's volume is 80,897 shares, 0.3 times the average volume over the last three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. The gross profit margin for WAB is 28.9%. WAB's operating margin of 16.1% and net margin of 9% are low relative to its gross margin.

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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). WAB's PEG ratio of 1.35 is in line with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

CH Robinson (Nasdaq:CHRW) is trading at $60.14 per share, down 2.1%. So far today, the company's volume is 403,108 shares. Yesterday, 1.2 million shares changed hands. Volume is used to evaluate how meaningful the price movement of a stock is. 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. CHRW has a low gross profit margin of 16.1%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Compared with its gross profit margin, CHRW's operating profit margin of 6.6% and net profit margin of 4.2% are low.

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 measures a company's stock market price by its revenues. The P/S ratio for CHRW is 1.02, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.

At $79.12, Copa Holdings (NYSE:CPA) has slipped 2%. At 136,686 shares, the company's volume so far today is 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. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for CPA is 47.8%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. CPA has an operating profit margin of 20.5%. 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 14.3%.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. CPA has a P/E ratio of 17.2, high compared to the industry average of 8.37. 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: Investment Valuation Ratios: Price/Earnings Ratio

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

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