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Tickers in this Article: DVA, PCYC, QCOR, THRX, WCG, RMD, GILD
The market is on the rise this morning. The Nasdaq has increased 0.2%; the S&P 500 has risen 0.2%; and the Dow is trading up 0.3%. 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.

Outperforming the market overall, the Healthcare sector (XLV) is up 0.3% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
DaVita (NYSE:DVA)$9.24 billion+6.2%
Pharmacyclics (Nasdaq:PCYC)$4.82 billion-4.2%
Questcor Pharmaceuticals (Nasdaq:QCOR)$2.85 billion+4.2%
Theravance (Nasdaq:THRX)$2.5 billion-3.5%
WellCare Health Plans (NYSE:WCG)$2.48 billion+1.9%
ResMed (NYSE:RMD)$5.57 billion-1.8%
Gilead (Nasdaq:GILD)$43.89 billion+1.8%
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DaVita (NYSE:DVA) is up 6.2% to reach a current price of $103.72 per share. So far today, 885,145 shares have changed hands. Volume indicates the level of interest that investors have in a company at its current price. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. DVA has a high P/S ratio of 1.24. 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.

At $66.87, Pharmacyclics (Nasdaq:PCYC) has slipped 4.2%. The company's volume for the day so far is 658,558 shares, one times the average volume over the last three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt ratio shows the proportion of assets that a company is financing through debt. PCYC has a debt ratio of 38.1%, which is fairly low. 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.

Questcor Pharmaceuticals (Nasdaq:QCOR) has risen 4.2% to hit a current price of $49.80 per share. The company is trading at a volume of one million shares. At this rate, trading activity will likely be down from yesterday when 4.9 million shares changed hands. 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. 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. 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). PEG ratio for QCOR is 0.59. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Theravance (Nasdaq:THRX) is trading at $24.95 per share, down 3.5%. So far today, the company's volume is 342,782 shares, 0.8 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. THRX's capitalization ratio is 47.7%. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

WellCare Health Plans (NYSE:WCG) is at $58.72 per share after an increase of 1.9%. The company is currently trading a volume of 237,809 shares. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. WCG's stock is trading for more than its book value with a P/B ratio of 2.05. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. 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: How Buybacks Warps The Price-To-Book Ratio

ResMed (NYSE:RMD) is down 1.8% to reach $38.49 per share. At 411,835 shares, the company's volume so far today is in keeping with the average volume over the past 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. 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. RMD's dividend yield of 0.4% is fairly low. If you are an income investor, this stock may not be attractive to you. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Due Diligence On Dividends

Gilead (Nasdaq:GILD) has risen 1.8% and is currently trading at $59.04 per share. So far today, the company's volume is 2.9 million shares. A stock's volume conveys how excited investors are about it. 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 price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for GILD is a high 4.31. 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.

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. 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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