The market is on the rise this morning. The Nasdaq has increased 0.7%; the S&P 500 is trading up 0.7%; and the Dow is up 0.6%.
Despite a good day for the overall market so far, the Gold and Silver sector (SLV) is down 0.8% and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|Hecla Mining Company (NYSE:HL)||$1.28 billion||+2.5%|
|Gold Fields Limited (ADR) (NYSE:GFI)||$9.25 billion||-1.9%|
|Harmony Gold Mining Co. (ADR) (NYSE:HMY)||$4.08 billion||-1.6%|
|AngloGold Ashanti Limited (ADR) (NYSE:AU)||$13.17 billion||-1.6%|
|Agnico-Eagle Mines Limited (USA) (NYSE:AEM)||$6.93 billion||-1.4%|
|Yamana Gold Inc. (USA) (NYSE:AUY)||$11.42 billion||-1.3%|
|Compania de Minas Buenaventura SA (ADR) (NYSE:BVN)||$9.67 billion||-1.3%|
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Hecla Mining (NYSE:HL) is currently trading at $4.58 per share, a 2.5% increase. So far today, the company's volume is two million shares, 0.3 times the current three-month average. 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. Gross profit margin, operating profit margin and net margin are commonly used margins. HL's gross profit margin is 71.2%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. Operating profit margin for HL is 27.9%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net margin is 27.8%.
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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. HL's P/E ratio of 11.6 is above the industry average of 1.06. 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. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Can Investors Trust the P/E Ratio?
Slipping 1.9%, Gold Fields Limited (NYSE:GFI) is currently trading at $12.55 per share. So far today, 1.7 million shares have 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 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. GFI has a gross profit margin of 47.1%. The operating profit margin indicates how much EBIT is generated per dollar of sales. GFI's operating profit margin is 0%. Net profit margins are those generated from all phases of a business, including taxes. The company's net profit margin is 15.2%.
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/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. GFI has a P/B ratio of 1.57 which shows that its share price is higher than its book value. 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. P/B value comparisons should be made among companies in the same industry rather than across industries. SEE: How Buybacks Warps The Price-To-Book Ratio
Falling 1.6%, Harmony Gold Mining Co (NYSE:HMY) is currently at a share price of $9.34. At 847,645 shares, the company's volume so far today is 0.3 times its current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. HMY has a low gross profit margin of 12.2%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. HMY has an operating profit margin of -6.8% and a net profit margin of 4.8%, both low compared to its gross profit margin.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. HMY's P/S ratio of 3.19 is on the high side. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
After a decline of 1.6%, AngloGold Ashanti Limited (NYSE:AU) has hit a share price of $33.95. The company's volume for the day so far is 870,909 shares. Yesterday, 1.2 million shares changed hands. 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. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. The gross profit margin for AU is 50.4%. 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. Operating profit margin for AU is 24.8%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 21.7%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for AU is 51.9%. 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.
Agnico-Eagle Mines Limited (NYSE:AEM) is down 1.4% to reach $39.92 per share. At 625,230 shares, the company's volume so far today is 0.3 times the average volume over the last three months. 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. Margin analysis is a great way to understand the profitability of companies. AEM has a gross profit margin of 48.2%. 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. With an operating profit margin of 29%, AEM has a low one relative to its gross profit margin. 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. The company's net profit margin is negative. A negative net profit margin means the company spent more money than it made.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. AEM has a dividend yield of 2%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. 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: Dividend Yield For The Downturn
At $15.11, Yamana Gold Inc (NYSE:AUY) has slipped 1.3%. The company is currently trading a volume of two million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. AUY's gross profit margin is 66.7%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. Relative to its gross profit margin, AUY's operating margin of 42.1% is on the low side. 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. Net margin is 25.3%.
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 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. AUY has a fairly low capitalization ratio of 9.2%. Investors generally consider a company with low debt and high equity levels is a good quality investment. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Compania de Minas Buenaventura SA (NYSE:BVN) is trading at $37.54 per share, down 1.3%. The company's volume is currently 362,287 shares for the day, 0.3 times the average daily volume. Volume indicates the level of interest that investors have in a company at its current price. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. BVN has a gross profit margin of 62.3%. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. Relative to its gross profit margin, the company has a low net profit margin of 54.4%. Investors in companies with low profit margins need to be concerned that if sales drop, profits will fall sharply as well. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). BVN's operating profit margin is 34.9%.
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 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. BVN's debt-equity ratio of 4% is on the low end. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.