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Tickers in this Article: E, IOC, TOT, RDS.B, RRC, RDS.A, CEO
This morning's trading has marked a bad day for the market so far. The Nasdaq is down 0.8%; the S&P 500 has fallen 0.7%; and the Dow has decreased 0.7%. 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 currently lagging behind the overall market, down 0.9%, and its current biggest movers are:
CompanyMarket CapPercentage Change
Eni S.p.A (NYSE:E)$82.02 billion-3.1%
InterOil Corporation (NYSE:IOC)$3.77 billion-3.1%
TOTAL S.A (NYSE:TOT)$116.29 billion-3.1%
Royal Dutch Shell plc (NYSE:RDS.B)$222.71 billion-2.4%
Range (NYSE:RRC)$11.39 billion-2.1%
Royal Dutch Shell plc (NYSE:RDS.A)$215.97 billion-2.1%
CNOOC Limited (NYSE:CEO)$91.86 billion-1.8%
Broker Summary: TD Ameritrade Thinkorswim

Eni S.p.A (NYSE:E) is trading at $43.86 per share, down 3.1%. With 223,272 shares changing hands so far today, the company's volume is 0.3 times its current three-month average. The trading volume for a stock indicates the level of investor interest. A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. E has a low P/S ratio of 0.5. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

InterOil Corporation (NYSE:IOC) has decreased to $75.54 per share, a 3.1% fall. So far this morning, 209,833 shares have changed hands. This is 0.2 times the average daily volume. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. IOC's debt ratio of 35.6% 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.

Currently trading at $49.99 per share, TOTAL S.A (NYSE:TOT) has fallen 3.1%. So far today, 1.4 million shares have changed hands,. A stock's volume conveys how excited investors are about it. 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 measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. The capitalizion ratio of 24.4% is on the low end. Investors generally consider a company with low debt and high equity levels is a good quality investment. 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.

At $71.01, Royal Dutch Shell plc (NYSE:RDS.B) has slipped 2.4%. So far today, the company's volume is 426,360 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. RDS.B's dividend yield is 4.7%. 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: Dividend Yield For The Downturn

After a decline of 2.1%, Range (NYSE:RRC) has hit a share price of $68.58. The company's volume for the day so far is 312,117 shares, 0.2 times its average over the past three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/sales ratio measures a company's stock market price by its revenues. RRC's P/S ratio of 7.67 is on the high side. 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.

Royal Dutch Shell plc (NYSE:RDS.A) has fallen 2.1% and is currently trading at $69.10 per share. The company's volume for the morning is 1.2 million shares. This is in line with its current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 shows the proportion of assets that a company is financing through debt. RDS.A has a debt ratio of 48.9%, 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.

Slipping 1.8%, CNOOC Limited (NYSE:CEO) is currently trading at $202.09 per share. At 28,888 shares, the company's volume so far today is lighter than yesterday's volume of 141,561 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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CEO's capitalization ratio is 9.4%, which is relatively low. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.

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