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Tickers in this Article: EXXI, TSO, FGP, CGV, LUFK, SM, CWEI
After the morning's trading, the Nasdaq has decreased 0.5%, the S&P 500 has declined 0.2% and the Dow is trading up 0.1%. The energy sector is the category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. Performance in the sector is largely driven by the supply and demand for worldwide energy. Energy producers will do very well during times of high oil and gas prices, but will earn less when the value of energy drops. Furthermore, this sector is sensitive to political events, which historically have driven changes in the price of oil.

The Energy sector (XLE) has climbed 0.6% overall, and these are the biggest movers in the sector so far:
CompanyMarket CapPercentage Change
Energy XXI (Bermuda) Limited (Nasdaq:EXXI).51 billion-4.2%
Tesoro (NYSE:TSO).56 billion+3.1%
Ferrellgas Partners, L.P. (NYSE:FGP).52 billion+2.9%
CGG Veritas (ADR) (NYSE:CGV).8 billion+2.7%
Lufkin Industries, Inc. (Nasdaq:LUFK).8 billion-2.6%
SM Energy Co. (NYSE:SM).11 billion-2.5%
Clayton Williams Energy, Inc. (Nasdaq:CWEI)8.2 million-2.4%
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At $30.45, Energy (Nasdaq:EXXI) has slipped 4.2%. So far today, 619,203 shares of the company's stock have changed hands. Yesterday, 695,681 shares changed hands. A stock's volume conveys how excited investors are about it. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. EXXI has a high gross profit margin of 89.8%. This may indicate that the company is over-pricing its products and/or services. EXXI has an operating profit margin of 37.7% and a net profit margin of 23.3%, both high compared to its gross profit margin.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The dividend yield is calculated by dividing a company's dividends per share by its stock price. The dividend yield for EXXI is 0.9%, which is on the low end. This may indicate that the company's stock is overpriced. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Investment Valuation Ratios: Dividend Yield

Tesoro (NYSE:TSO) is up 3.1% to reach a current price of $26.19 per share. This morning, the company is trading a volume of 1.9 million shares. Volume is an important indicator because it indicates how significant a price shift is. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. TSO has a low gross profit margin of 5.4%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Relative to its gross profit margin, TSO's operating profit margin of 1.7% and net profit margin of 1.6% are low.

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 to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. TSO has a PEG ratio of 1.29. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Ferrellgas Partners (NYSE:FGP) is currently trading at $19.74 per share, a 2.9% increase. With 117,869 shares changing hands so far today, the company's volume is 0.7 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. FGP has a low gross profit margin of 13.9%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. FGP has an operating profit margin of 7.2% and a net profit margin of -0.7%, both low compared to its gross profit margin.

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 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. FGP has a P/B ratio of 33.46 which shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio

CGG Veritas (NYSE:CGV) has risen 2.7% and is currently trading at $25.68 per share. This morning, the company's volume is 70,127 shares. This is in line with its current daily average. Volume indicates the level of interest that investors have in a company at its current price. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. The gross profit margin for CGV is 37.2%. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. CGV's operating profit margin is 6.8%. Net profit margin compares net income with sales. Net profit margin for the company is 0.2%.

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/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. CGV has a high P/S ratio of 1.36. 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.

Lufkin Industries (Nasdaq:LUFK) has fallen 2.6% and is currently trading at $52.17 per share. The company's volume is currently 94,398 shares for the day, while it was 420,392 shares yesterday. The trading volume for a stock indicates the level of investor interest. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. LUFK has a low gross profit margin of 24.4%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Compared with its gross profit margin, LUFK's operating profit margin of 8.6% and net profit margin of 6.3% are low.

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. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for LUFK is a low 43.6%. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

SM (NYSE:SM) is trading at $47.20 per share, down 2.5%. So far today, the company's volume is 212,964 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for SM is 72.5%. Relative to its gross profit margin, SM's operating profit margin of 14.9% and net profit margin of 17.5% are high.

Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. SM's D/E ratio is 68%. 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.

Currently trading at $47.18 per share, Clayton Williams Energy (Nasdaq:CWEI) has fallen 2.4%. The company's volume for the day so far is 6,754 share, 0.1 times its average over the past three months. 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. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. CWEI's gross profit margin is 67.1%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. CWEI has an operating profit margin of 24.6%. Net profit margin is a good ratio for determining how a company is performing. The company has a net profit margin of 25.8%.

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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CWEI has a high capitalization ratio of 64%. If the company is a company is in a highly competitive business and hobbled by high debt, it will find its competitors taking advantage of its problems to grab more market share. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.

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