The Nasdaq has decreased 1%, the S&P 500 is trading down 0.5% and the Dow is down 0.2%, marking a bad morning for the market. 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 down 0.5%, outperforming the market overall. Currently, the biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Apollo Residential Mortgage (NYSE:AMTG)||$567.1 million||-4.9%|
|Deutsche (NYSE:DB)||$38.02 billion||-4.6%|
|Prudential (NYSE:PRU)||$25.89 billion||-3.1%|
|World (Nasdaq:WRLD)||$906.6 million||-2.6%|
|Canadian Imperial Bank of Commerce (NYSE:CM)||$32.19 billion||-1.5%|
|United Fire Group (Nasdaq:UFCS)||$647.8 million||+1.5%|
|A.F.P Provida SA (NYSE:PVD)||$1.99 billion||-1.3%|
Software Summary: Finviz.com Stock Screener
At $22.30, Apollo Residential Mortgage (NYSE:AMTG) has slipped 4.9%. So far today, the company's volume is 624,058 shares, 0.7 times its current daily average. The trading volume for a stock indicates the level of investor interest. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. AMTG's P/B ratio of 1.13 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Deutsche (NYSE:DB) is down 4.6% to reach $39.51 per share. This morning, the company is trading a volume of 1.5 million shares. This is consistent with its current three-month average. A stock's volume conveys how excited investors are about it. 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. DB's dividend yield is 2.3%. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Investment Valuation Ratios: Dividend Yield
Prudential (NYSE:PRU) is currently trading at a share price of $53.85, a 3.1% decline. The company is currently trading a volume of 1.8 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. 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 value by its total revenues or alternatively, a company's price per share by its revenue per share. PRU's P/S ratio of 0.43 is fairly low. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
World (Nasdaq:WRLD) has fallen 2.6% and is currently trading at $67.58 per share. At 63,766 shares, the company's volume so far today is which is likely to result in less activity than yesterday's volume of 436,276 shares. Volume is an important indicator because it indicates how significant a price shift is. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for WRLD is 50.5%. 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.
Slipping 1.5%, Canadian Imperial Bank of Commerce (NYSE:CM) is currently trading at $78.13 per share. The company's volume for the morning is 53,473 shares. This is 0.3 times the average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). CM has a P/E ratio of 10.6, in line with the industry average. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Investment Valuation Ratios: Price/Earnings Ratio
United Fire Group (Nasdaq:UFCS) has risen 1.5% to hit a current price of $25.86 per share. The company's volume for the day so far is 24,468 shares, 0.2 times the average volume over the last three months. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. The debt-equity ratio of 6% is relatively low. 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.
After a decline of 1.3%, A.F.P Provida SA (NYSE:PVD) has hit a share price of $89.13. The company's volume for the day so far is 8,162 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. PVD has a P/B ratio of 3.38 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Using The Price-To-Book Ratio To Evaluate Companies
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.