The Nasdaq has declined 1.5%, the S&P 500 is trading down 0.9% and the Dow has fallen 1% on a bad morning for the market. 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) is up 0.1% on a bad day for the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Swift Energy Company (NYSE:SFY)||$698.8 million||+6.6%|
|Bill Barrett Corporation (NYSE:BBG)||$946.3 million||+5.7%|
|EnCana Corporation (USA) (NYSE:ECA)||$14.16 billion||+4.8%|
|Berry Petroleum Company (NYSE:BRY)||$1.93 billion||+3.6%|
|Cabot Oil & Gas Corporation (NYSE:COG)||$8.65 billion||-3.1%|
|QEP Resources Inc (NYSE:QEP)||$4.91 billion||+2.9%|
|Ecopetrol S.A. (ADR) (NYSE:EC)||$1.81 billion||-2.7%|
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Swift Energy (NYSE:SFY) has increased to a share price of $17.39, a 6.6% rise. So far today, 695,322 shares have changed hands. 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 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. 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. SFY has a relatively high gross profit margin of 81.6%. This may indicate that the company is over-pricing its products and/or services. Relative to its gross profit margin, SFY's operating profit margin of 4.3% and net profit margin of 13.9% are high.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. SFY's P/E ratio of 8.0 is under the industry average of 21.35. 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: The P/E Ratio: A Good Market-Timing Indicator
Bill (NYSE:BBG) has moved up 5.7% and is currently trading at $20.80 per share. The company's volume is currently 1.7 million shares for the day, 0.8 times the average volume over the last three months. Volume is used to evaluate how meaningful the price movement of a stock 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. BBG has a high gross profit margin of 78.8%. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. BBG has an operating profit margin of 18.7% and a net profit margin of 6.5%, both high compared to its gross profit margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. PEG ratio for BBG is 1.1. 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.
After an increase of 4.8%, EnCana Corporation (NYSE:ECA) has reached a current price of $20.19. The company is trading at a volume of 7.9 million shares. Trading activity is down from yesterday when 8.6 million shares changed hands. 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. 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. ECA has a gross profit margin of 65%. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. Relative to its gross profit margin, the company has a high net profit margin of 0.7%. Investors in companies with high profit margins can be confident that even if sales dip slightly, profits will remain strong. Investors trying to assess a company's ability to continue to pay its fixed expenses even if its business declines may want to evaluate the operating margin ratio. ECA's operating profit margin is 23.6%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. ECA's stock is trading for more than its book value with a P/B ratio of 1.75. 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
Berry Petroleum (NYSE:BRY) has risen 3.6% to hit a current price of $37.02 per share. At 316,163 shares, the company's volume so far today is 0.4 times the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin ratios highlight companies that are worth further examination. The gross profit margin for BRY is 71.9%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. Net profit margin is -14.7%. This shows that the company reported a net loss in the most recent quarter. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. BRY has an operating profit margin of 22.3%.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. BRY has a dividend yield of 0.9%, which is fairly low. This could indicate that that the stock is overpriced or that future dividends might be higher. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Investment Valuation Ratios: Dividend Yield
Cabot Oil & Gas (NYSE:COG) has fallen 3.1% and is currently trading at $39.95 per share. The company's volume for the day so far is 4.5 million shares. 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 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. COG has a gross profit margin of 74.2%. Compared with its gross profit margin, COG's operating profit margin of 17.1% and net profit margin of 12.3% are high.
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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for COG is a high 6.26. 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.
QEP Resources (NYSE:QEP) is at $28.34 per share after an increase of 2.9%. With 884,011 shares changing hands so far today, the company's volume is 0.4 times its current three-month average. Volume is an important indicator because it indicates how significant a price shift is. 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 QEP is 50.4%. The operating profit margin indicates how much EBIT is generated per dollar of sales. QEP's operating profit margin is 8.2%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. Net profit margin for the company is 11.1%.
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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. QEP has a capitalization ratio of 32.9%. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
After a decline of 2.7%, Ecopetrol S.A (NYSE:EC) has hit a share price of $53.83. The company's volume for the day so far is 212,810 shares. This is less trading activity than there was yesterday. A stock's volume conveys how excited investors are about it. 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. EC has a gross profit margin of 53.2%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. Relative to its gross profit margin, EC's operating margin of 41.6% is on the low side. Net profit margin is calculated by dividing net income by sales. Net margin is 23.6%.
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. 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. EC has a low debt-equity ratio of 22%. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.