Filed Under: ,
Tickers in this Article: MOH, SJT, SLV, SHG, PVD, BCH, AMG
The market is on the rise this morning. The Nasdaq has climbed 0.2%; the S&P 500 is up 0.4%; and the Dow has risen 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 0.5% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Molina Healthcare, Inc. (NYSE:MOH)$1.19 billion-28.8%
San Juan Basin Royalty Trust (NYSE:SJT)$633.9 million-4.4%
iShares Silver Trust (ETF) (NYSE:SLV)$9.13 billion-3.1%
Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG)$15.75 billion+2.5%
A.F.P Provida SA (ADR) (NYSE:PVD)$1.65 billion+2%
Banco de Chile (ADR) (NYSE:BCH)$12.05 billion+2%
Affiliated Managers Group, Inc. (NYSE:AMG)$5.22 billion+1.9%
Forex Broker Summary: Forex Capital Markets (FXCM)

Molina Healthcare, Inc. Shares of Molina Healthcare (NYSE:MOH) are currently trading at $18.33, a steep decline of 28.8%. This morning, the company is trading a volume of 4.8 million shares. Volume indicates the level of interest that investors have in a company at its current price. 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.

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.

The debt-equity ratio of 30% is relatively low. 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 percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

SEE: Debt Reckoning

San Juan Basin Royalty Trust San Juan Basin (NYSE:SJT) has decreased to $13.00 per share, a 4.4% fall. So far today, the company's volume is 227,739 shares, 0.4 times the current daily average. 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. There are three key profit-margin ratios: gross profit margins, operating profit margins and net profit margins.

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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share.

SJT has a P/B ratio of 48.15 which shows that its share price is higher 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets.

SEE: Using The Price-To-Book Ratio To Evaluate Companies

iShares Silver Trust (ETF) After a decline of 3.1%, iShares Silver Trust (NYSE:SLV) has hit a share price of $27.64. The company's volume is currently 15.6 million shares. Trading activity is down from yesterday when 21.5 million shares changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. Shinhan Financial Group Co., Ltd. (ADR) Shinhan Financial Group Co., Ltd (NYSE:SHG) is at $68.13 per share after an increase of 2.5%. The company's volume for the day so far is 23,628 share, 0.8 times the current three-month average. A stock's volume conveys how excited investors are about it. 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.

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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price.

The dividend yield for SHG is 2%, which is on the low end. This may indicate that the company's stock is overpriced. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns.

SEE: Investment Valuation Ratios: Dividend Yield

A.F.P Provida SA (ADR) After rising 2%, A.F.P Provida SA (NYSE:PVD) is currently trading at a share price of $75.99. So far today, 6,845 shares have changed hands. Volume is an important indicator because it indicates how significant a price shift is. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. PVD's gross profit margin of 98.3% is on the high side. 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. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. Relative to its gross profit margin, PVD's operating margin is on the high side. A high operating margin indicates that a company has a greater ability to pay its fixed costs, which means that the company has greater financial flexibility and a greater margin of error should its business decline. Operating profit margin for PVD is 84%. The company's net profit margin is 58.1%.

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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation.

PVD has a P/E ratio of 10.5. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall.

SEE: How To Find P/E And PEG Ratios

Banco de Chile (ADR) Banco de Chile (NYSE:BCH) has risen 2% and is currently trading at $84.80 per share. So far today, the company's volume is 9,449 shares, 0.4 times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money.

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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company.

The debt ratio for BCH is 92%, which is relatively high. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. 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.

SEE: How To Make A Winning Long-Term Stock Pick

Affiliated Managers Group, Inc. Affiliated Managers Group (NYSE:AMG) has increased to a share price of $103.66, a 1.9% rise. The company is trading at a volume of 286,385 shares. Yesterday, 457,455 shares changed hands. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for AMG is 58%. 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. 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. AMG's operating profit margin is 26%. The company has a net profit margin of 9.6%.

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 reveues or alternatively, a company's price per share by its revenue per share.

The P/S ratio for AMG is 3.41, 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.

SEE: Value Investing + Relative Strength = Higher Returns

The Bottom Line The nature of the market is such that stocks will have good days and bad days. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. 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.

comments powered by Disqus

Trading Center