The Nasdaq has increased 0.6%, the S&P 500 has risen 0.5% and the Dow has moved up 0.6% on a good day for the market so far. 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 1%, outperforming the market overall. The biggest movers in the sector so far are:
|Company||Market Cap||Percentage Change|
|Watson Pharmaceuticals, Inc (NYSE:WPI)||$10.04 billion||+5.6%|
|Pharmacyclics (Nasdaq:PCYC)||$4.48 billion||+3.9%|
|Eli Lilly (NYSE:LLY)||$49.2 billion||+3.5%|
|HMS (Nasdaq:HMSY)||$3.04 billion||-3.4%|
|MWI Veterinary Supply (Nasdaq:MWIV)||$1.23 billion||+3%|
|Alexion Pharmaceuticals (Nasdaq:ALXN)||$20.02 billion||+2.7%|
|Onyx Pharmaceuticals (Nasdaq:ONXX)||$4.67 billion||+2.6%|
Broker Summary: Charles Schwab Online Brokerage
Watson Pharmaceuticals, Inc (NYSE:WPI) has risen 5.6% and is currently trading at $83.04 per share. So far today, the company's volume is 1.4 million shares. This is 1.6 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 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. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. WPI has a low capitalization ratio of 23.6%. Low leverage is a significant balance sheet strength, a sign of a less risky investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
After rising 3.9%, Pharmacyclics (Nasdaq:PCYC) is currently trading at a share price of $67.45. At 269,786 shares, the company's volume so far today is in line with the current daily average. Volume is used to evaluate how meaningful the price movement of a stock 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 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. The P/B ratio for PCYC is 32.12, 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. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Eli Lilly (NYSE:LLY) is at $43.88 per share after an increase of 3.5%. This morning, the company is trading a volume of 26.7 million shares. Volume indicates the level of interest that investors have in a company at its current price. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. Relative to the industry P/E ratio of 13.66, LLY's 11.8 is low. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: The P/E Ratio: A Good Market-Timing Indicator
After a decline of 3.4%, HMS (Nasdaq:HMSY) has hit a share price of $34.05. So far today, the company's volume is 1.9 million shares, whereas yesterday, volume was only 765,466 shares. A stock's volume conveys how excited investors are about it. 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. 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. HMSY has a high P/S ratio of 6.83. 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 compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
MWI Veterinary Supply (Nasdaq:MWIV) is currently trading at $99.36 per share, a 3% increase. The company is currently trading a volume of 15,380 shares. This is 0.4 times the 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. 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. MWIV's debt ratio of 48.3% is on the low side. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Increasing 2.7%, Alexion Pharmaceuticals (Nasdaq:ALXN) is trading at $106.49 per share. At 387,325 shares, the company's volume so far today is consistent with its current daily average. 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. Valuation ratios like 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 are useful in determining how attractive a potential or existing investment is. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. ALXN's debt-equity ratio of 13% is on the low end. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Onyx Pharmaceuticals (Nasdaq:ONXX) has increased to a share price of $73.55, a 2.6% rise. The company's volume for the day so far is 479,319 shares. If a stock price moves on high volume, this means that the change is a significant one. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the 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. The capitalizion ratio of 19.3% is on the low end. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. 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.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. 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.