The market is on the rise this morning. The Nasdaq is up 0.5%; the S&P 500 has risen 0.3%; and the Dow has climbed 0.1%. 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.
Underperforming the market overall, the Healthcare sector (XLV) is up 0.5%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|ImmunoGen (Nasdaq:IMGN)||$1.07 billion||+5.4%|
|MWI Veterinary Supply (Nasdaq:MWIV)||$1.22 billion||+2.8%|
|Eli Lilly (NYSE:LLY)||$50.9 billion||+2.2%|
|Theravance (Nasdaq:THRX)||$2.7 billion||-2%|
|Endologix (Nasdaq:ELGX)||$773.7 million||-1.9%|
|Viropharma (Nasdaq:VPHM)||$1.84 billion||-1.4%|
|Vertex Pharmaceuticals (Nasdaq:VRTX)||$11.56 billion||+1.3%|
Software Summary: Finviz.com Stock Screener
After an increase of 5.4%, ImmunoGen (Nasdaq:IMGN) has reached a current price of $14.59. The company is currently trading a volume of 910,953 shares. A stock's volume conveys how excited investors are about it. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. IMGN's P/B ratio of 11.14 shows that its share price is higher 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. 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: Using The Price-To-Book Ratio To Evaluate Companies
MWI Veterinary Supply (Nasdaq:MWIV) has risen 2.8% and is currently trading at $98.74 per share. With 25,236 shares changing hands so far today, the company's volume is consistent with its current three-month average. 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. P/E ratio for MWIV is 23.8. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: How To Find P/E And PEG Ratios
Eli Lilly (NYSE:LLY) is currently trading at $44.84 per share, a 2.2% increase. So far this morning, 5.8 million shares have changed hands. This is 0.7 times its average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. PEG ratio for LLY is -1.84. 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.
Theravance (Nasdaq:THRX) is down 2% to reach $27.34 per share. The company's volume is currently 113,929 shares for the day, while it was 419,967 shares yesterday. The trading volume for a stock indicates the level of investor interest. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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 THRX is a high 15.32. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
At $12.37, Endologix (Nasdaq:ELGX) has slipped 1.9%. So far today, 138,474 shares have changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 debt ratio is calculated by dividing total liabilities by total assets. ELGX has a debt ratio of 40.2%, which is fairly low. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Viropharma (Nasdaq:VPHM) has decreased to $26.48 per share, a 1.4% fall. At 350,795 shares, the company's volume so far today is 0.3 times its average over the past three months. 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. VPHM has a low debt-equity ratio of 18%. 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.
Vertex Pharmaceuticals (Nasdaq:VRTX) has moved up 1.3% and is currently trading at $54.24 per share. The company's volume for the morning is 291,200 shares. This is 0.2 times the current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. VRTX has a low capitalization ratio of 27.8%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
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.