On a bad day for the market, the Nasdaq has decreased 0.1%, the S&P 500 has declined 0.2% and the Dow is down 0.2%. 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.
The Financial sector (XLF) is down 0.2%, underperforming the market overall. The current biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|MBIA (NYSE:MBI)||$1.7 billion||+10.5%|
|FleetCor Technologies, Inc. (NYSE:FLT)||$3.05 billion||+8.6%|
|PHH Corporation (NYSE:PHH)||$915.4 million||+6.1%|
|Corpbanca Sociedad Anonima (ADR) (NYSE:BCA)||$2.77 billion||-5.1%|
|SCBT Financial Corporation (Nasdaq:SCBT)||$562.5 million||+3.9%|
|StanCorp Financial Group, Inc. (NYSE:SFG)||$1.36 billion||+3.2%|
|Bancolombia S.A. (ADR) (NYSE:CIB)||$7.06 billion||+2.8%|
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MBIA (NYSE:MBI) is currently at $9.68 per share after a dramatic increase of 10.5%. This morning, the company's volume is four million shares. This is 1.8 times its average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. The capitalization ratio for MBI is 85%, which is fairly high. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. 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.
FleetCor Technologies (NYSE:FLT) has moved up 8.6% and is currently trading at $39.86 per share. The company is currently trading a volume of one million 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. FLT's PEG ratio of 1.1 is in line with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
PHH (NYSE:PHH) has increased to a share price of $17.15, a 6.1% rise. So far today, the company's volume is 668,873 shares, 1.2 times the average volume over the last three months. If a stock price moves on high volume, this means that the change is a significant one. Understanding investment valuation ratios allows an 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. PHH's P/B ratio of 0.63 indicates that its share price is lower than its book value. Industries that require more infrastructure capital (for each dollar of profit) will usually trade at P/B ratios much lower than those that don't. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
After a decline of 5.1%, Corpbanca Sociedad Anonima (NYSE:BCA) has hit a share price of $17.27. The company's volume is currently 14,449 shares. Yesterday's volume was only 11,489 shares. Volume is an important indicator because it indicates how significant a price shift 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 dividend yield is calculated by dividing a company's dividends per share by its stock price. BCA has a dividend yield of 6.8%. For income-oriented investors such as retirees, a stock with a high dividend yield may be more attractive than a stock with a low dividend yield. SEE: Due Diligence On Dividends
SCBT (Nasdaq:SCBT) is at $38.79 per share after an increase of 3.9%. The company's volume is currently 30,895 shares for the day, 0.7 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. SCBT's P/S ratio of 2.06 is on the high side. This could be a good sign if the share price increases. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
After an increase of 3.2%, StanCorp Financial Group (NYSE:SFG) has reached a current price of $31.69. The company's volume for the day so far is 193,272 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for SFG is 89.1%, which is relatively high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Increasing 2.8%, Bancolombia S.A (NYSE:CIB) is trading at $57 per share. At 479,527 shares, the company's volume so far today is consistent with its average over the last three months. 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). Compared to the industry average of 9.65, CIB's P/E ratio of 15.5 is quite high. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
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