It's been a bad day for the market after the morning's trading. The Nasdaq is down 0.2%; the S&P 500 has decreased 0.2%; and the Dow has declined 0.2%. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.
The Financial sector (XLF) is currently lagging behind the overall market, down 0.6%, and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|First Cash Financial Services (Nasdaq:FCFS)||$1.35 billion||-3%|
|ICICI Bank Limited (NYSE:IBN)||$22.01 billion||+2.3%|
|Prosperity Bancshares (NYSE:PB)||$2.53 billion||-2.3%|
|Credit Suisse Group (NYSE:CS)||$29.65 billion||+2%|
|National (Nasdaq:NATL)||$507.9 million||+2%|
|UMB (Nasdaq:UMBF)||$2.09 billion||-1.9%|
|Signature (Nasdaq:SBNY)||$3.2 billion||-1.6%|
Forex Broker Summary: Forex Capital Markets (FXCM)
First Cash Financial Services (Nasdaq:FCFS) has fallen 3% and is currently trading at $45.86 per share. The company's volume for the day so far is 55,617 shares. The trading volume for a stock indicates the level of investor interest. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/sales ratio measures a company's stock market price by its revenues. FCFS has a high P/S ratio of 2.1. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
ICICI Bank Limited (NYSE:IBN) is at $39.07 per share after an increase of 2.3%. So far today, the company's volume is 961,460 shares, in keeping with its current three-month average. Volume indicates the level of interest that investors have in a company at its current price. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. IBN's P/E ratio of 4.1 is under the industry average of 10.63. A low P/E ratio may indicate that the market expects relatively slower earnings growth. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: The P/E Ratio: A Good Market-Timing Indicator
At $44.17, Prosperity Bancshares (NYSE:PB) has slipped 2.3%. So far today, the company's volume is 47,780 shares. This is on pace to fall short of yesterday's volume of 377,974 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. 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 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 PB is consistent with the industry average at 1.66. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Credit Suisse Group (NYSE:CS) has risen 2% and is currently trading at $23.58 per share. At 1.7 million shares, the company's volume so far today is consistent with its current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 provides a way of evaluating whether a stock is relatively cheap or expensive. CS' P/B ratio of 0.82 indicates that its share price is lower than its book value. Industries that require more infrastructure capital (for each dollar of profit) will usually trade at P/B ratios much lower than those that don't. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Investment Valuation Ratios: Price/Book Value Ratio
National (Nasdaq:NATL) has moved up 2% and is currently trading at $26.60 per share. This morning, the company is trading a volume of 9,237 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The dividend yield is calculated by dividing a company's dividends per share by its stock price. NATL has a low dividend yield of 1.5%. This may indicate that the company's stock is overpriced. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor. SEE: Investment Valuation Ratios: Dividend Yield
UMB (Nasdaq:UMBF) is currently trading at a share price of $50.48, a 1.9% decline. At 26,115 shares, the company's volume so far today is 0.2 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. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio is calculated by dividing total liabilities by total assets. UMBF has a high debt ratio of 90.5%. 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.
After a decline of 1.6%, Signature (Nasdaq:SBNY) has hit a share price of $67.94. So far today, 25,276 shares of the company's stock have changed hands. This is a sign that there will be less trading activity than there was yesterday. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. SBNY has a low capitalization ratio of 17.2%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.