The Nasdaq remains relatively unchanged, the S&P 500 has increased 0.3% and the Dow has increased 0.2% after the morning's trading. 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 biggest movers in the Financial sector (XLF) (+1%) are:

CompanyMarket CapPercentage Change
Deutsche (NYSE:DB)$29.39 billion+5.9%
Texas Pacific (NYSE:TPL)$529 million+2.8%
Main Street (NYSE:MAIN)$866.9 million-2.4%
Virtus Investment Partners (Nasdaq:VRTS)$684.1 million+2.3%
San Juan Basin (NYSE:SJT)$743.4 million-2.2%
Ocwen (NYSE:OCN)$3.41 billion-1.6%
Credicorp Ltd (NYSE:BAP)$9.41 billion+1.6%
Broker Summary: Charles Schwab Online Brokerage

Deutsche (NYSE:DB) has moved up 5.9% and is currently trading at $34.61 per share. So far today, the company's volume is 1.4 million shares,. As a stock moves up or down, it is important to pay attention to the trading volume. This indicates the level of interest: the higher the volume, the more the interest. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. DB has a high debt ratio of 97.5%. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Texas Pacific (NYSE:TPL) is at $60.57 per share after an increase of 2.8%. The company's volume for the morning is 2,833 shares. This is 0.3 times its average daily volume. Volume is used to evaluate how meaningful the price movement of a stock 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. Dividend yield measures the income that a stock will generate for an investor. TPL has a low dividend yield of 0.4%. If you are an income investor, this stock may not be attractive to you. 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

At $26.81, Main Street (NYSE:MAIN) has slipped 2.4%. At 181,631 shares, the company's volume so far today is 0.8 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for MAIN is a high 6.35. 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.

Increasing 2.3%, Virtus Investment Partners (Nasdaq:VRTS) is trading at $89.40 per share. So far today, the company's volume is 7,291 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 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. VRTS has a debt-equity ratio of 10%, which is on the low side. This shows that the company's assets are financed primarily through equity. 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 2.2%, San Juan Basin (NYSE:SJT) has hit a share price of $15.60. So far today, 139,091 shares have changed hands,. If a stock price moves on high volume, this means that the change is a significant one. 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/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. The P/B ratio for SJT is 57.78, indicating that the stock is trading for more 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. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Slipping 1.6%, Ocwen (NYSE:OCN) is currently trading at $24.88 per share. So far today, the company's volume is 583,604 shares. This is 0.3 times the current daily average. 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 use valuation ratios as tools to estimate what kind of deal a particular investment is. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. OCN's capitalization ratio is 1.7%, which is relatively low. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. 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.

Credicorp Ltd (NYSE:BAP) has risen 1.6% and is currently trading at $119.83 per share. With 110,819 shares changing hands so far today, the company's volume is 0.3 times its current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). BAP has a P/E ratio of 12.6, high compared to the industry average of 9.91. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. 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

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. 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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Tickers in this Article: DB, TPL, MAIN, VRTS, SJT, OCN, BAP

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