The market has been doing well after the morning's trading. The Nasdaq has increased 0.6%; the S&P 500 has moved up 0.3%; and the Dow is trading up 0.3%. The energy sector is the category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. Performance in the sector is largely driven by the supply and demand for worldwide energy. Energy producers will do very well during times of high oil and gas prices, but will earn less when the value of energy drops. Furthermore, this sector is sensitive to political events, which historically have driven changes in the price of oil.
Underperforming the market overall, the Energy sector (XLE) is up 0.1%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|Cobalt International Energy, Inc. (NYSE:CIE)||$8.53 billion||+10.4%|
|Bill Barrett Corporation (NYSE:BBG)||$1.01 billion||+4.3%|
|Approach Resources Inc. (Nasdaq:AREX)||$928.2 million||+3.6%|
|Peabody Energy (NYSE:BTU)||$6.16 billion||-3%|
|HollyFrontier Corp (NYSE:HFC)||$8.06 billion||+2.5%|
|TransMontaigne Partners L.P. (NYSE:TLP)||$530.6 million||+2.4%|
|InterOil Corporation (USA) (NYSE:IOC)||$4.19 billion||-2.3%|
Broker Summary: Fidelity Online Brokerage
Cobalt International Energy (NYSE:CIE) has soared 10.4% to reach a current price of $22.95 per share. So far today, the company's volume is 2.8 million shares, 0.9 times the average daily volume. 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. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. The P/B ratio for CIE is 3.92, indicating that the stock is trading for more 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
After an increase of 4.3%, Bill (NYSE:BBG) has reached a current price of $21.82. So far today, 464,501 shares of the company's stock have changed hands. 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. BBG has a high P/S ratio of 1.36. This could be a good sign if the share price increases. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
After rising 3.6%, Approach Resources (Nasdaq:AREX) is currently trading at a share price of $28.69. The company's volume for the day so far is 142,334 shares, 0.3 times the average volume over the last 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for AREX is a low 34.6%. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Peabody Energy (NYSE:BTU) is down 3% to reach $22.28 per share. So far today, the company's volume is 2.3 million 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. BTU has a capitalization ratio of 51.8%, which is on the high end. A company considered too highly leveraged (too much debt) may find its freedom of action restricted by its creditors and/or have its profitability hurt by high interest costs. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
HollyFrontier (NYSE:HFC) is at $40.57 per share after an increase of 2.5%. At 3.1 million shares, the company's volume so far today is 0.9 times the current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. Relative to the industry P/E ratio of 21.74, HFC's 6.3 is low. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: The P/E Ratio: A Good Market-Timing Indicator
TransMontaigne Partners (NYSE:TLP) has risen 2.4% to hit a current price of $37.59 per share. The company is trading at a volume of 14,441 shares. Volume is an important indicator because it indicates how significant a price 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 debt-equity (D/E) ratio is a leverage ratio. TLP's debt-equity ratio of 30% is on the low end. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. 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.
Currently trading at $85.01 per share, InterOil Corporation (NYSE:IOC) has fallen 2.3%. The company's volume is currently 402,895 shares for the day, 0.9 times the current three-month average. A stock's volume conveys how excited investors are about it. 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. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. IOC's P/B ratio of 11.6 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Using The Price-To-Book Ratio To Evaluate 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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.