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Elan Corporation, plc (ADR) and More Big Movers in Healthcare Today
The market is having a bad day so far. The Nasdaq has declined 0.3%; the S&P 500 is down 0.4%; and the Dow has decreased 0.5%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.
The Healthcare sector (XLV) is currently lagging behind the overall market, down 0.6%, and its current biggest movers are:
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Elan Corporation, plc (NYSE:ELN) has risen 5.7% and is currently trading at $11.73 per share. So far today, the company's volume is 4.5 million shares, consistent with its average over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. ELN's P/B ratio of 8.89 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. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: How Buybacks Warps The Price-To-Book Ratio
Select Medical (NYSE:SEM) is currently trading at $10.52 per share, a 3.8% increase. So far today, 334,278 shares have changed hands. Volume indicates the level of interest that investors have in a company at its current price. 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. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. SEM has a P/S ratio of 0.49, on the low end. The lower the P/S ratio, the more reasonably price the stock, all else being equal. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Slipping 3.6%, Taro Pharmaceutical (NYSE:TARO) is currently trading at $39.48 per share. The company's volume is currently 67,891 shares for the day, 2.8 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. P/E ratio for TARO is 8.9. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After an increase of 3.5%, Acorda Therapeutics (Nasdaq:ACOR) has reached a current price of $22.47. The company's volume is currently 700,758 shares. Yesterday's volume was only 268,831 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. ACOR's debt-equity ratio of 3% is on the low end. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Neogen (Nasdaq:NEOG) has fallen 3.4% and is currently trading at $38.36 per share. At 12,631 shares, the company's volume so far today is 0.1 times its current three-month 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. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. NEOG's debt ratio of 13% is on the low side. 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. 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.
Falling 3.2%, Genomic Health (Nasdaq:GHDX) is currently at a share price of $34.25. This morning, the company is trading a volume of 82,833 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. GHDX has a PEG ratio of 3.49. 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.
Increasing 3.1%, Merrimack Pharmaceuticals (Nasdaq:MACK) is trading at $7.61 per share. So far today, the company's volume is 22,245 shares, 0.3 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. MACK has a high P/S ratio of 1.89. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
The Healthcare sector (XLV) is currently lagging behind the overall market, down 0.6%, and its current biggest movers are:
| Company | Market Cap | Percentage Change |
| Elan Corporation, plc (ADR) (NYSE:ELN) | $6.52 billion | +5.7% |
| Select Medical Holdings Corporation (NYSE:SEM) | $1.42 billion | +3.8% |
| Taro Pharmaceutical Industries Ltd. (NYSE:TARO) | $1.82 billion | -3.6% |
| Acorda Therapeutics Inc (Nasdaq:ACOR) | $870.8 million | +3.5% |
| Neogen Corporation (Nasdaq:NEOG) | $938.4 million | -3.4% |
| Genomic Health, Inc. (Nasdaq:GHDX) | $1.08 billion | -3.2% |
| Merrimack Pharmaceuticals Inc (Nasdaq:MACK) | $688.6 million | +3.1% |
Elan Corporation, plc (NYSE:ELN) has risen 5.7% and is currently trading at $11.73 per share. So far today, the company's volume is 4.5 million shares, consistent with its average over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. ELN's P/B ratio of 8.89 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. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: How Buybacks Warps The Price-To-Book Ratio
Select Medical (NYSE:SEM) is currently trading at $10.52 per share, a 3.8% increase. So far today, 334,278 shares have changed hands. Volume indicates the level of interest that investors have in a company at its current price. 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. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. SEM has a P/S ratio of 0.49, on the low end. The lower the P/S ratio, the more reasonably price the stock, all else being equal. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Slipping 3.6%, Taro Pharmaceutical (NYSE:TARO) is currently trading at $39.48 per share. The company's volume is currently 67,891 shares for the day, 2.8 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. P/E ratio for TARO is 8.9. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After an increase of 3.5%, Acorda Therapeutics (Nasdaq:ACOR) has reached a current price of $22.47. The company's volume is currently 700,758 shares. Yesterday's volume was only 268,831 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. ACOR's debt-equity ratio of 3% is on the low end. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Neogen (Nasdaq:NEOG) has fallen 3.4% and is currently trading at $38.36 per share. At 12,631 shares, the company's volume so far today is 0.1 times its current three-month 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. 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. NEOG's debt ratio of 13% is on the low side. 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. 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.
Falling 3.2%, Genomic Health (Nasdaq:GHDX) is currently at a share price of $34.25. This morning, the company is trading a volume of 82,833 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. GHDX has a PEG ratio of 3.49. 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.
Increasing 3.1%, Merrimack Pharmaceuticals (Nasdaq:MACK) is trading at $7.61 per share. So far today, the company's volume is 22,245 shares, 0.3 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. MACK has a high P/S ratio of 1.89. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
by
Investopedia Staff
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