The market has been doing well after the morning's trading. The Nasdaq has increased 0.7%; the S&P 500 has climbed 0.7%; and the Dow is trading up 0.6%. 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.
Outperforming the market overall, the Energy sector (XLE) is up 2.2% and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|Continental Resources, Inc. (NYSE:CLR)||$12.08 billion||+6.7%|
|Clayton Williams Energy, Inc. (Nasdaq:CWEI)||$595.9 million||+6.2%|
|Lufkin Industries, Inc. (Nasdaq:LUFK)||$1.78 billion||+5.5%|
|EOG Resources (NYSE:EOG)||$23.98 billion||+5.3%|
|Pioneer Natural Res (NYSE:PXD)||$10.67 billion||+5.2%|
|Anadarko Petroleum (NYSE:APC)||$32.8 billion||+5%|
|Oil States International, Inc. (NYSE:OIS)||$3.41 billion||+4.3%|
Forex Broker Summary: Forex Capital Markets (FXCM)
Continental Resources (NYSE:CLR) has increased to a share price of $71.20, a 6.7% rise. With 805,591 shares changing hands so far today, the company's volume is 0.5 times its current three-month average. Volume indicates the level of interest that investors have in a company at its current price. 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. CLR has a relatively high gross profit margin of 87.4%. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. Operating margin for CLR is 34.3% and net margin is 33.2%, both high relative to its gross margin.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. 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. CLR's P/B ratio of 5.42 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: Using The Price-To-Book Ratio To Evaluate Companies
Clayton Williams Energy (Nasdaq:CWEI) is at $52.04 per share after an increase of 6.2%. The company is trading at a volume of 20,901 shares. Yesterday, 64,089 shares changed hands. 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. Margin ratios highlight companies that are worth further examination. CWEI's gross profit margin is 67.1%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. Operating profit margin for CWEI is 24.6%. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. Net margin is 25.8%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for CWEI is 2.28, which is relatively high. This could be a good sign if the share price increases. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.
After an increase of 5.5%, Lufkin Industries (Nasdaq:LUFK) has reached a current price of $55.76. At 109,964 shares, the company's volume so far today is 0.3 times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. 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. LUFK's operating margin of 8.6% and net margin of 6.3% are low relative to its gross margin.
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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. LUFK's debt ratio of 43.6% 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.
Increasing 5.3%, EOG (NYSE:EOG) is trading at $93.68 per share. The company's volume for the day so far is 1.2 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. EOG has a high gross profit margin of 84.3%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. EOG's operating margin of 19.9% and net margin of 11.6% are high relative to its gross margin.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. EOG's P/E ratio of 19.0 is under the industry average of 25.62. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
Pioneer Natural Res (NYSE:PXD) is up 5.2% to reach a current price of $91.24 per share. At 986,927 shares, the company's volume so far today is 0.3 times the average volume over the last three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. The gross profit margin for PXD is 74.3%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. PXD has an operating profit margin of 37.2%. Net profit margin is a good ratio for determining how a company is performing. The company's net profit margin is 30.2%.
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-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 45% is relatively low. 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 percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Anadarko (NYSE:APC) has risen 5% to hit a current price of $68.97 per share. So far today, two million shares of the company's stock have changed hands. This is less trading activity than there was yesterday. 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. 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. APC has a gross profit margin of 50.2%. APC has an operating profit margin of 78.4%, which is low relative to its gross profit margin.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. APC's capitalization ratio is 43.1%. 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.
Oil States International (NYSE:OIS) is currently trading at $68.98 per share, a 4.3% increase. At 130,275 shares, the company's volume so far today is 0.2 times the average daily volume. The trading volume for a stock indicates the level of investor interest. Margin ratios highlight companies that are worth further examination. The gross profit margin for OIS is 26.3%. Operating margin for OIS is 18.6% and net margin is 10.4%, both low relative to its gross margin.
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/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. OIS has a P/B ratio of 1.67 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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.