Filed Under: ,
Tickers in this Article: LL, CHA, ULTA, DIN, BBBY, GCO, STRA
Currently, the Nasdaq has moved up 0.1%, the S&P 500 has remained steady and the Dow has increased 0.1%.

The biggest movers in the Services sector (IYC) (+0.4%) are:
CompanyMarket CapPercentage Change
Lumber Liquidators Holdings (NYSE:LL).43 billion-4.4%
China Telecom Corporation Limited (NYSE:CHA).94 billion-4.3%
Ulta Salon, Cosmetics & Fragrance (Nasdaq:ULTA).3 billion-2.7%
DineEquity (NYSE:DIN).01 billion+2.4%
Bed Bath & Beyond (Nasdaq:BBBY).43 billion-2.4%
Genesco (NYSE:GCO).71 billion-2.4%
Strayer Education (Nasdaq:STRA)7.1 million+2.2%
Beginner's Guide To FXCM And Trading Station

At $50.38, Lumber Liquidators Holdings (NYSE:LL) has slipped 4.4%. At 417,749 shares, the company's volume so far today is 0.8 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. LL's PEG ratio of 2.39 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.

China Telecom Corporation Limited (NYSE:CHA) is trading at $59.07 per share, down 4.3%. This morning, the company's volume is 28,948 shares. This is in line with its current daily 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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. CHA has a P/B ratio of 1.17 which shows that its share price is higher than its book value. 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. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: How Buybacks Warps The Price-To-Book Ratio

Ulta Salon, Cosmetics & Fragrance (Nasdaq:ULTA) is currently trading at a share price of $96.92, a 2.7% decline. So far today, the company's volume is 271,413 shares, with trading activity in keeping with yesterday's lighter than yesterday's volume of 648,668 shares. The trading volume for a stock indicates the level of investor interest. 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. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. The P/S ratio for ULTA is 2.75, which is relatively high. 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.

DineEquity (NYSE:DIN) is up 2.4% to reach a current price of $56.39 per share. This morning, the company is trading a volume of 21,070 shares. Volume indicates the level of interest that investors have in a company at its current price. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. DIN has a debt ratio of 91.4%, which is on the high side. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. 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.

Currently trading at $69.09 per share, Bed Bath & Beyond (Nasdaq:BBBY) has fallen 2.4%. The company's volume is currently 1.7 million shares for the day, 0.8 times its average over the past three months. 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. 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. BBBY's P/E ratio is 16.7. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Understanding The P/E Ratio

Slipping 2.4%, Genesco (NYSE:GCO) is currently trading at $68.91 per share. The company's volume for the morning is 67,843 shares. This is 0.3 times its current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. GCO has a fairly low capitalization ratio of 11.4%. Low leverage is a significant balance sheet strength, a sign of a less risky investment. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Strayer Education (Nasdaq:STRA) has increased to a share price of $69.49, a 2.2% rise. So far today, 54,578 shares have changed hands, with trading activity in keeping with yesterday's. High volume indicates a lot of investor interest while low volume indicates the opposite. 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 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). STRA has a PEG ratio of 1.33. 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. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. 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.

comments powered by Disqus

Trading Center