Filed Under: ,
Tickers in this Article: UHS, PCYC, GILD, STJ, VRTX, UTHR, LPNT
The market has been doing well after the morning's trading. The Nasdaq has risen 1.1%; the S&P 500 has increased 0.6%; and the Dow has moved up 0.4%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.

Despite a good day for the overall market so far, the Healthcare sector (XLV) is down 0.3% and its current biggest movers are:
CompanyMarket CapPercentage Change
Universal Health Services (NYSE:UHS)$4.05 billion+3.9%
Pharmacyclics (Nasdaq:PCYC)$4.56 billion-3.4%
Gilead (Nasdaq:GILD)$45.58 billion+3.2%
St Jude Medical (NYSE:STJ)$12.75 billion+2.7%
Vertex Pharmaceuticals (Nasdaq:VRTX)$12.13 billion+2.5%
United (Nasdaq:UTHR)$2.84 billion+2.5%
LifePoint Hospitals (Nasdaq:LPNT)$2.08 billion+2.5%
Beginner's Guide To

Universal Health Services (NYSE:UHS) has increased to a share price of $43.43, a 3.9% rise. The company's volume for the day so far is 713,388 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. UHS has a P/S ratio of 0.58, on the low end. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. 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.

Pharmacyclics (Nasdaq:PCYC) is trading at $63.41 per share, down 3.4%. With 332,219 shares changing hands so far today, the company's volume is consistent with its average over the last three months. 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. 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 debt ratio is calculated by dividing total liabilities by total assets. PCYC's debt ratio of 39.7% is on the low side. A low debt ratio means the company has more available cash flow. 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.

Rising 3.2%, Gilead (Nasdaq:GILD) is currently trading at $62.20 per share. This morning, the company is trading a volume of five million shares. 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 a 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. P/E ratio for GILD is 18.0. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?

After an increase of 2.7%, St Jude Medical (NYSE:STJ) has reached a current price of $41.72. The company's volume is currently 1.5 million shares for the day, 0.8 times the current daily average. 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. 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 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. STJ's D/E ratio is 65%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Vertex Pharmaceuticals (Nasdaq:VRTX) has risen 2.5% and is currently trading at $57.64 per share. So far today, 541,879 shares of the company's stock have changed hands. This is on pace to fall short of yesterday's volume of 1.4 million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Understanding investment valuation ratios allows an investor to assess the true 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. VRTX has a fairly low capitalization ratio of 27.8%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.

United (Nasdaq:UTHR) has risen 2.5% to hit a current price of $56.29 per share. The company's volume is currently 296,348 shares for the day, consistent with its current three-month average. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). UTHR has a PEG ratio of 0.83, which is consistent with the industry average. 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.

LifePoint Hospitals (Nasdaq:LPNT) is at $43.59 per share after an increase of 2.5%. So far today, 154,095 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. 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 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. The P/B ratio for LPNT is 1.04, indicating that the stock is trading for more than its book value. 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. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Investment Valuation Ratios: Price/Book Value Ratio

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

comments powered by Disqus

Trading Center