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Tickers in this Article: WCRX, ARNA, CELG, WCG, BIIB, PCYC, ONXX
The morning has been good for the market. The Nasdaq has risen 1.9%; the S&P 500 is up 1.8%; and the Dow has moved up 1.7%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.

Underperforming the market overall, the Healthcare sector (XLV) is up 1.5%, and these are its current biggest movers:
CompanyMarket CapPercentage Change
Warner (Nasdaq:WCRX)$3.55 billion-9.5%
Arena Pharmaceuticals (Nasdaq:ARNA)$1.99 billion-4.9%
Celgene (Nasdaq:CELG)$30.61 billion+4.5%
WellCare Health Plans (NYSE:WCG)$2.5 billion+3.6%
Biogen Idec (Nasdaq:BIIB)$34.67 billion+3.4%
Pharmacyclics (Nasdaq:PCYC)$4.48 billion+3.3%
Onyx Pharmaceuticals (Nasdaq:ONXX)$4.88 billion+3%
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Falling 9.5%, Warner (Nasdaq:WCRX) is currently at a share price of $12.84. At 10.6 million shares, the company's volume so far today is two 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for WCRX is 1.71, 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. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

After a decline of 4.9%, Arena Pharmaceuticals (Nasdaq:ARNA) has hit a share price of $8.71. The company's volume is currently 9.2 million shares. Volume indicates the level of interest that investors have in a company at its current price. 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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The D/E ratio for ARNA is 70%. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.

Rising 4.5%, Celgene (Nasdaq:CELG) is currently trading at $74.12 per share. At two million shares, the company's volume so far today is 1.1 times the current daily 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. 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. 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. CELG has a low capitalization ratio of 17.6%. Investors generally consider a company with low debt and high equity levels is a good quality investment. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.

After rising 3.6%, WellCare Health Plans (NYSE:WCG) is currently trading at a share price of $60.12. The company is currently trading a volume of 234,996 shares. The trading volume for a stock indicates the level of investor interest. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. WCG has a debt ratio of 54.2%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Increasing 3.4%, Biogen Idec (Nasdaq:BIIB) is trading at $151.65 per share. With 575,052 shares changing hands so far today, the company's volume is 0.9 times the average volume over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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). BIIB has a PEG ratio of 1.88, 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.

Pharmacyclics (Nasdaq:PCYC) is at $67.01 per share after an increase of 3.3%. The company's volume for the day so far is 327,593 shares. This is on pace to fall short of yesterday's volume of 1.8 million shares. 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. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for PCYC is 31.91, indicating that the stock is trading for more 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. 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: Using The Price-To-Book Ratio To Evaluate Companies

Onyx Pharmaceuticals (Nasdaq:ONXX) has increased to a share price of $77.29, a 3% rise. At 525,779 shares, the company's volume so far today is 0.4 times the average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. ONXX has a high P/S ratio of 9.43. This could be a good sign if the share price increases. 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 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. 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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