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Tickers in this Article: SM, PXP, BPT, MUR, HERO, ANR, CLR
This morning's trading has marked a bad day for the market so far. The Nasdaq is trading down 0.2%; the S&P 500 has decreased 0.4%; and the Dow has slipped 0.5%. 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.

The Energy sector (XLE) is currently lagging behind the overall market, down 0.5%, and its current biggest movers are:
CompanyMarket CapPercentage Change
SM (NYSE:SM)$3.17 billion-3.4%
Plains Exploration & Production (NYSE:PXP)$5.29 billion-2.6%
BP Prudhoe Bay (NYSE:BPT)$2.31 billion-2.5%
Murphy (NYSE:MUR)$10.68 billion-2.5%
Hercules Offshore (Nasdaq:HERO)$654.9 million+2.4%
Alpha Natural Resources, Inc (NYSE:ANR)$1.52 billion+2.3%
Continental Resources (NYSE:CLR)$13.39 billion-2.3%
Forex Broker Summary: UFXMarkets

After a decline of 3.4%, SM (NYSE:SM) has hit a share price of $47.03. The company's volume is currently 240,416 shares for the day, 0.3 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. Dividend yield measures the income that a stock will generate for an investor. SM has a dividend yield of 0.2%, which is fairly low. This may indicate that the company's stock is overpriced. For income-oriented investors such as retirees, a stock with a high dividend yield may be more attractive than a stock with a low dividend yield. SEE: Investment Valuation Ratios: Dividend Yield

At $39.92, Plains Exploration & Production (NYSE:PXP) has slipped 2.6%. So far today, the company's volume is 403,487 shares. Volume indicates the level of interest that investors have in a company at its current price. 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 price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. PXP's PEG ratio is 1.63. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

BP Prudhoe Bay (NYSE:BPT) is down 2.5% to reach $105.26 per share. The company's volume is currently 210,509 shares for the day, on pace to finish the day below yesterday's volume of 843,075 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. 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. BPT's stock is trading for more than its book value with a P/B ratio of 5263.0. 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. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Murphy (NYSE:MUR) is currently trading at a share price of $53.65, a 2.5% decline. The company's volume for the day so far is 408,642 shares. This is 0.3 times the average volume over the last three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. The P/E ratio for MUR is 12.2, above the industry average of 10.45. This could mean that the market is expecting big things over the next few months or years. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?

Hercules Offshore (Nasdaq:HERO) is up 2.4% to reach a current price of $4.23 per share. So far today, the company's volume is 1.4 million shares, 0.7 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. HERO has a low P/S ratio of 0.87. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

After rising 2.3%, Alpha Natural Resources, Inc (NYSE:ANR) is currently trading at a share price of $7.06. The company's volume for the day so far is 10.9 million shares. 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. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for ANR is 62%, which is relatively high. As such, the company is highly leveraged and not highly liquid. 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.

Continental Resources (NYSE:CLR) has fallen 2.3% and is currently trading at $72.24 per share. So far today, the company's volume is 327,303 shares, lighter than yesterday's volume of 1.2 million shares. Volume is an important indicator because it indicates how significant a price shift is. 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 debt-equity (D/E) ratio is a leverage ratio. CLR has a D/E ratio of 81%. 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. It is important to weigh current activity against historical performance when making any investment decisions. 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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