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Tickers in this Article: VVUS, SHF, ALNY, THRX, LH, VRX, ZMH
The Nasdaq has slipped 0.1%, the S&P 500 has declined 0.1% and the Dow is trading down 0.2% on a bad morning for the market. 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.

The Healthcare sector (XLV) is up 0.3% on a bad day for the market overall. The biggest movers in the sector are currently:
CompanyMarket CapPercentage Change
VIVUS, Inc. (Nasdaq:VVUS)$2.86 billion-7.7%
Schiff Nutrition International Inc. (NYSE:SHF)$547.2 million-4.4%
Alnylam Pharmaceuticals, Inc. (Nasdaq:ALNY)$995.4 million-3.4%
Theravance Inc (Nasdaq:THRX)$2.55 billion+3%
LabCorp (NYSE:LH)$9.16 billion-2.5%
Valeant Pharmaceuticals Int (USA) (NYSE:VRX)$13.43 billion+2.1%
Zimmer Holdings (NYSE:ZMH)$11.09 billion+2%
Broker Summary: TD Ameritrade Thinkorswim

Slipping 7.7%, VIVUS (Nasdaq:VVUS) is currently trading at $26.50 per share. The company's volume is currently 7.6 million shares for the day, 1.9 times its average over the past three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. VVUS has a P/B ratio of 8.1 which shows that its share price is higher 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: Using The Price-To-Book Ratio To Evaluate Companies

Schiff Nutrition International (NYSE:SHF) is trading at $17.89 per share, down 4.4%. So far today, 24,624 shares have changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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 SHF is 4.74. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Currently trading at $18.50 per share, Alnylam Pharmaceuticals (Nasdaq:ALNY) has fallen 3.4%. At 2.4 million shares, the company's volume so far today is two times the current daily average. A stock's volume conveys how excited investors are about it. 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. ALNY has negative operating and net profit margins. This is because the company reported net and operating losses in the most recent quarter.

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 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. ALNY's P/B ratio of 4.87 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: How Buybacks Warps The Price-To-Book Ratio

Theravance (Nasdaq:THRX) is at $30.39 per share after an increase of 3%. So far today, 572,709 shares of the company's stock have changed hands. Trading activity is down from yesterday when 802,360 shares changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. The company has a negative net profit margin of -5.6%. 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. 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. The P/S ratio for THRX is 11.61, which is relatively high. This could be a good sign if the share price increases. 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.

LabCorp (NYSE:LH) has decreased to $92.30 per share, a 2.5% fall. With 636,301 shares changing hands so far today, the company's volume is 0.8 times the average volume 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. Margin ratios highlight companies that are worth further examination. LH has a gross profit margin of 39.3%. 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). The operating margin for LH is 20.2%, which is low compared its gross profit margin. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company's net profit margin is 9.9%.

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. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. LH has a debt ratio of 57.6%. 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.

Valeant Pharmaceuticals Int (NYSE:VRX) is up 2.1% to reach a current price of $46.00 per share. The company is currently trading a volume of 466,452 shares. 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. 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. The gross profit margin for VRX is 71.9%. VRX's operating margin of 7.2% and net margin of 5.1% are high relative to its gross margin.

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 price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. VRX's PEG ratio is 6.02. 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.

After an increase of 2%, Zimmer (NYSE:ZMH) has reached a current price of $64.21. At 706,903 shares, the company's volume so far today is 0.8 times the average daily volume. Volume indicates the level of interest that investors have in a company at its current price. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. 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. ZMH's gross profit margin of 83% is fairly high. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Compared with its gross profit margin, ZMH's operating profit margin of 25.9% and net profit margin of 17% are high.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. ZMH's capitalization ratio is 21.7%, which is relatively low. Investors generally consider a company with low debt and high equity levels is a good quality investment. 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.

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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