The morning has been bad for the market. The Nasdaq is trading down 0.2%; the S&P 500 is down 0.2%; and the Dow has slipped 0.2%. 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.
Despite a bad day for the market overall so far, the Healthcare sector (XLV) is up 0.1% and its biggest movers are currently:
|Company||Market Cap||Percentage Change|
|CareFusion Corporation (NYSE:CFN)||$5.45 billion||+6.9%|
|Akorn, Inc. (Nasdaq:AKRX)||$1.27 billion||-5.7%|
|Pacira Pharmaceuticals Inc (Nasdaq:PCRX)||$523.5 million||-4.6%|
|Insulet Corporation (Nasdaq:PODD)||$964.6 million||+4.1%|
|Viropharma Inc (Nasdaq:VPHM)||$1.61 billion||+3.3%|
|Abaxis Inc (Nasdaq:ABAX)||$828.1 million||-2.9%|
|Community Health Systems (NYSE:CYH)||$2.22 billion||-2.7%|
Broker Summary: Fidelity Online Brokerage
Rising 6.9%, CareFusion (NYSE:CFN) is currently trading at $26.27 per share. The company's volume is currently 3.9 million shares for the day, 1.8 times the current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PEG ratio for CFN is 2.05. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Slipping 5.7%, Akorn (Nasdaq:AKRX) is currently trading at $12.55 per share. The company's volume is currently 708,628 shares. This is on pace to reach yesterday's trading volume of 1.6 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. 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 especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. The P/B ratio for AKRX is 7.13, 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
Pacira Pharmaceuticals (Nasdaq:PCRX) has fallen 4.6% and is currently trading at $15.46 per share. The company's volume is currently 88,589 shares for the day, consistent with its current daily average. If a stock price moves on high volume, this means that the change is a significant one. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. A price/sales ratio is derived by dividing stock market price by company sales. PCRX has a high P/S ratio of 14.99. 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.
After an increase of 4.1%, Insulet (Nasdaq:PODD) has reached a current price of $20.93. The company's volume for the day so far is 289,490 shares. 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. A company's value as an investment is more easily 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. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for PODD is 71.1%, which is relatively high. This means that most of the company's assets are financed through debt. 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.
Increasing 3.3%, Viropharma (Nasdaq:VPHM) is trading at $23.91 per share. So far today, the company's volume is 451,734 shares, 0.3 times its current three-month 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. VPHM's P/E ratio of 14.6 is above the industry average of 0.79. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?
Abaxis (Nasdaq:ABAX) is currently trading at a share price of $36.72, a 2.9% decline. The company is trading at a volume of 49,793 shares. This is greater than yesterday's volume of 42,896 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. ABAX's capitalization ratio is 0.5%, which is relatively low. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.
Falling 2.7%, Community Health (NYSE:CYH) is currently at a share price of $24.34. At 297,220 shares, the company's volume so far today is 0.3 times its current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. CYH's D/E ratio of 359% is on the high side. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.