On a bad day for the market, the Nasdaq has fallen 1.5%, the S&P 500 is down 0.9% and the Dow has declined 1%.
The Consumer/Non-Cyclical sector (XLP) is down 0.4%, outperforming the market overall. Currently, the biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Monster Beverage Corp (Nasdaq:MNST)||$12.53 billion||-4.4%|
|Estee Lauder Cos (NYSE:EL)||$20.95 billion||-1.9%|
|Sanderson Farms, Inc. (Nasdaq:SAFM)||$1.06 billion||-1.8%|
|Mead Johnson Nutrition (NYSE:MJN)||$17.66 billion||-1.7%|
|Fortune Brands (NYSE:BEAM)||$9.62 billion||-1.6%|
|J&J Snack Foods Corp. (Nasdaq:JJSF)||$1.09 billion||-1.6%|
|Starbucks (Nasdaq:SBUX)||$40.01 billion||-1.5%|
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After a decline of 4.4%, Monster (Nasdaq:MNST) has hit a share price of $67.99. The company is trading at a volume of 2.1 million shares. This is below yesterday's volume of 2.9 million shares. If a stock price moves on high volume, this means that the change is a significant one. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. The gross profit margin for MNST is 53.8%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. Operating profit margin for MNST is 27.8%. Net profit margin is calculated by dividing net income by sales. The company's net profit margin is 17.1%.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. MNST has a low debt ratio of 27.4%. 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.
Falling 1.9%, Estee Lauder (NYSE:EL) is currently at a share price of $52.85. So far today, the company's volume is 462,900 shares, 0.3 times its current daily average. A stock's volume conveys how excited investors are about it. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. EL's gross profit margin of 79.2% is on the high side. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. Relative to its gross profit margin, EL's operating profit margin of 9.4% and net profit margin of 8.9% are high.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. EL's PEG ratio is 1.77. 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.
Sanderson Farms (Nasdaq:SAFM) is down 1.8% to reach $45.49 per share. This morning, the company is trading a volume of 87,819 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 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. SAFM has a low gross profit margin of 2.8%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. SAFM's operating margin of 6.9% and net margin of -2.8% are low relative to its gross margin.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. SAFM's stock is trading for more than its book value with a P/B ratio of 2.02. 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Mead Johnson (NYSE:MJN) is currently trading at a share price of $85.12, a 1.7% decline. The company's volume is currently 379,595 shares for the day, 0.2 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for MJN is 64.4%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. The company's net margin of 14% is high relative to its gross profit margin. A high net profit margin means a company is able to control its costs that buy goods and services at prices significantly higher than it costs to produce or provide them. The operating profit margin indicates how much EBIT is generated per dollar of sales. MJN's operating profit margin is 25.2%.
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. Dividend yield measures the income that a stock will generate for an investor. MJN's dividend yield of 1.4% is fairly low. This may indicate that the company's stock is overpriced. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Dividend Yield For The Downturn
Slipping 1.6%, Fortune (NYSE:BEAM) is currently trading at $60.04 per share. So far today, the company's volume is 289,021 shares. Trading activity is down from yesterday when 936,406 shares changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. BEAM's gross profit margin is 71.2%. Net profit margins are those generated from all phases of a business, including taxes. Relative to its gross profit margin, the company has a low net profit margin of 56.7%. This is a potential cause for concern, as companies with low profit margins can get wiped out in a downturn. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. BEAM has an operating profit margin of 24.6%.
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 price/sales ratio measures a company's stock market price by its revenues. BEAM has a high P/S ratio of 5.73. 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.
J&J Snack (Nasdaq:JJSF) has decreased to $56.95 per share, a 1.6% fall. So far today, the company's volume is 8,104 shares, 0.1 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. The gross profit margin for JJSF is 33.7%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. Operating profit margin for JJSF is 8.6%. Net profit margin compares net income with sales. Net profit margin for the company is 7%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). Relative to the industry P/E ratio of 37.23, JJSF's 19.6 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. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
At $51.94, Starbucks (Nasdaq:SBUX) has slipped 1.5%. The company's volume for the day so far is 2.8 million shares. The trading volume for a stock indicates the level of investor interest. Margin ratios highlight companies that are worth further examination. SBUX's gross profit margin is 56.5%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. SBUX has an operating profit margin of 13.5%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company has a net profit margin of 10.6%.
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 divides a company's P/E ratio by its growth rate of earnings-per-share. SBUX has a PEG ratio of 1.67, which is consistent 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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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