The Nasdaq has moved up 0.3%, the S&P 500 has increased 0.1% and the Dow has risen 0.2%, marking 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 relatively unchanged on a good day for the market overall. So far, the biggest movers in the sector are:

CompanyMarket CapPercentage Change
Masimo (Nasdaq:MASI)$1.28 billion+4.1%
PSS World Medical (Nasdaq:PSSI)$1.1 billion+2.8%
Pacira Pharmaceuticals (Nasdaq:PCRX)$555.3 million-2.8%
Bio-Reference Laboratories (Nasdaq:BRLI)$771.4 million-1.8%
Smith & Nephew plc (NYSE:SNN)$10.43 billion+1.5%
Genomic Health (Nasdaq:GHDX)$972.1 million-1.4%
Haemonetics (NYSE:HAE)$1.99 billion+1.2%
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After rising 4.1%, Masimo (Nasdaq:MASI) is currently trading at a share price of $23.41. The company's volume is currently 110,917 shares for the day, 0.4 times the current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. PEG ratio for MASI is 1.22. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

PSS World Medical (Nasdaq:PSSI) is at $22.58 per share after an increase of 2.8%. This morning, the company is trading a volume of 439,333 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. PSSI's stock is trading for more than its book value with a P/B ratio of 2.89. This may be a sign that the company is overvalued. 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

Pacira Pharmaceuticals (Nasdaq:PCRX) is trading at $16.65 per share, down 2.8%. At 67,119 shares, the company's volume so far today is 0.3 times its current daily average. If a stock price moves on high volume, this means that the change is a significant one. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. A price/sales ratio is derived by dividing stock market price by company sales. PCRX's P/S ratio of 18.44 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. 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.

Bio-Reference Laboratories (Nasdaq:BRLI) has decreased to $27.34 per share, a 1.8% fall. So far today, the company's volume is 83,893 shares. At this rate, trading activity will likely be down from yesterday when 233,039 shares changed hands. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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 ratio shows the proportion of assets that a company is financing through debt. BRLI has a low debt ratio of 28.2%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Smith & Nephew plc (NYSE:SNN) has increased to a share price of $55.67, a 1.5% rise. At 36,649 shares, the company's volume so far today is 0.6 times its current three-month average. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. SNN's P/E ratio is 13.5. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Understanding The P/E Ratio

Genomic Health (Nasdaq:GHDX) has fallen 1.4% and is currently trading at $31.50 per share. So far today, 66,305 shares have changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. GHDX has a PEG ratio of 3.65. 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.

Rising 1.2%, Haemonetics (NYSE:HAE) is currently trading at $78.51 per share. At 43,566 shares, the company's volume so far today is 0.3 times the average daily volume. A stock's volume conveys how excited investors are about it. 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 calculated by dividing the current stock price by the company's book value per share. HAE's P/B ratio of 2.66 shows that its share price is higher than its book value. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. 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. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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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Tickers in this Article: MASI, PSSI, PCRX, BRLI, SNN, GHDX, HAE

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