The Nasdaq is up 0.7%, the S&P 500 has climbed 0.5% and the Dow has moved up 0.3%, marking a bad morning for the market. 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.

The Healthcare sector (XLV) is up 0.8%, outperforming the market overall. The biggest movers in the sector so far are:


CompanyMarket CapPercentage Change
Rigel Pharmaceuticals (Nasdaq:RIGL)$741.3 million-8.1%
ISIS Pharmaceuticals (Nasdaq:ISIS)$1.33 billion-5.5%
Brookdale Senior Living (NYSE:BKD)$2.89 billion+5.5%
Amarin Corporation plc (Nasdaq:AMRN)$1.84 billion-5.2%
Emeritus (NYSE:ESC)$949 million+5.2%
Bio-Reference Laboratories (Nasdaq:BRLI)$825.2 million+3.6%
Thoratec (Nasdaq:THOR)$2.02 billion+3.4%
Broker Summary: TD Ameritrade Thinkorswim

Rigel Pharmaceuticals (Nasdaq:RIGL) is down 8.1% to reach $9.51 per share. This morning, the company is trading a volume of 3.1 million shares. The trading volume for a stock indicates the level of investor interest. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio shows the proportion of assets that a company is financing through debt. RIGL has a debt ratio of 8.7%, which is fairly low. 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.

Falling 5.5%, ISIS Pharmaceuticals (Nasdaq:ISIS) is currently at a share price of $12.48. The company's volume for the day so far is 1.9 million shares, 1.5 times the average volume over the last three months. If a stock price moves on high volume, this means that the change is a significant one. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. ISIS has a D/E ratio of 150%, which is relatively high. This shows that the company's assets are financed primarily through debt. 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.

Brookdale Senior Living (NYSE:BKD) has moved up 5.5% and is currently trading at $24.89 per share. So far today, the company's volume is 2.5 million shares. Yesterday, volume was only 1.8 million shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. 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. The capitalization ratio for BKD is 67.9%, which is fairly high. If the company is a company is in a highly competitive business and hobbled by high debt, it will find its competitors taking advantage of its problems to grab more market share. 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.

Currently trading at $11.70 per share, Amarin Corporation plc (Nasdaq:AMRN) has fallen 5.2%. So far today, the company's volume is 4.1 million shares, one times its current daily average. Volume is an important indicator because it indicates how significant a price 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. 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. AMRN's P/B ratio of 292.56 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. 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

Emeritus (NYSE:ESC) has risen 5.2% and is currently trading at $22.15 per share. The company is currently trading a volume of 930,976 shares. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. ESC has a low P/S ratio of 0.56. The lower the P/S ratio, the more reasonably price the stock, all else being equal. 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.

Bio-Reference Laboratories (Nasdaq:BRLI) is currently trading at $30.85 per share, a 3.6% increase. So far today, the company's volume is 247,867 shares, 1.1 times the current three-month 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. 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 measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for BRLI is a low 28.2%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Rising 3.4%, Thoratec (Nasdaq:THOR) is currently trading at $35.45 per share. The company's volume is currently 214,316 shares. 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. 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 price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). THOR has a PEG ratio of 1.91. 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 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. 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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Tickers in this Article: RIGL, ISIS, BKD, AMRN, ESC, BRLI, THOR

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