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Tickers in this Article: C, SBR, NLY, AMG, CME, MOH, ADS
The market is doing well so far today. The Nasdaq has risen 0.7%; the S&P 500 has increased 0.7%; and the Dow has moved up 0.6%. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.

Outperforming the market overall, the Financial sector (XLF) is up 0.8% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Citigroup Inc. (NYSE:C)$78.38 billion-41%
Sabine Royalty Trust (NYSE:SBR)$694.1 million+3.4%
Annaly Capital Management, Inc. (NYSE:NLY)$16.68 billion-2.8%
Affiliated Managers Group, Inc. (NYSE:AMG)$5.28 billion+2.7%
CME Group (Nasdaq:CME)$17.89 billion-2%
Molina Healthcare, Inc. (NYSE:MOH)$1.01 billion-2%
Alliance Data Systems Corporation (NYSE:ADS)$6.55 billion+1.9%
Software Summary: Stock Screener

Citigroup (NYSE:C) is at a share price of $15.78 after a sharp decline of 41%. So far today, the company's volume is 2,878 shares. 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. Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. C has a P/B ratio of 0.25, which shows that its book value is higher than its share price. This could mean that either the market believes the asset value is overstated, or the company is earning a very poor (even negative) return on its assets. P/B value comparisons should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Rising 3.4%, Sabine (NYSE:SBR) is currently trading at $49.24 per share. The company's volume is currently 12,046 shares for the day, 0.5 times the average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. 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 price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for SBR is 14.08, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.

Slipping 2.8%, Annaly Capital Management (NYSE:NLY) is currently trading at $16.64 per share. The company's volume is currently 4.4 million shares. 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. 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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. NLY's debt ratio of 86.7% is fairly high. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After an increase of 2.7%, Affiliated Managers Group (NYSE:AMG) has reached a current price of $105.52. The company's volume is currently 286,716 shares for the day, 0.6 times its current three-month average. A stock's volume conveys how excited investors are about it. 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. AMG has a gross profit margin of 58%. A company's operating margin is calculated by dividing operating income by revenues. Operating profit margin for AMG is 26%. 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 margin is 9.6%.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. AMG has a fairly low capitalization ratio of 11.8%. Low leverage is a significant balance sheet strength, a sign of a less risky investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

CME (Nasdaq:CME) is trading at $263.83 per share, down 2%. So far today, 170,149 shares have 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 analysis is a great way to understand the profitability of companies. CME has a relatively high gross profit margin of 77.6%. 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 provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. The operating margin for CME is 58.2%, which is low compared its gross profit margin. Net profit margin examines how effectively a company is managed and how profitable it is by looking at how much of each dollar in revenues ultimately hits the company's bottom line. The company has a net profit margin of 51%.

Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt-equity (D/E) ratio is a leverage ratio. CME has a low debt-equity ratio of 10%. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Molina Healthcare (NYSE:MOH) has fallen 2% and is currently trading at $21.40 per share. At 473,521 shares, the company's volume so far today is 0.7 times the current daily average. Volume is an important indicator because it indicates how significant a price shift is. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). MOH has a P/E ratio of 47.2, high compared to the industry average of 11.15. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: Understanding The P/E Ratio

Alliance Data (NYSE:ADS) is currently trading at $132.51 per share, a 1.9% increase. So far today, 198,163 shares of the company's stock have changed hands. This is below yesterday's volume of 427,194 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. ADS has a gross profit margin of 44.1%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. ADS has an operating profit margin of 28.3%, which is low relative to its gross profit margin. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 10.4%.

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 is one of the more common methods of determining whether a stock is fairly valued. The P/B ratio for ADS is 22.73, indicating that the stock is trading for more than its book value. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. 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: Investment Valuation Ratios: Price/Book Value Ratio

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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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