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Healthcare Stocks, Including Warner, Making Big Moves on August 29, 2012
Currently, the Nasdaq has decreased 0.2%, the S&P 500 has been relatively flat and the Dow has remained steady. 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.
While the market overall has shown little change, the Healthcare sector (XLV) is up 0.3% and its current biggest movers are:
Broker Summary: TD Ameritrade Thinkorswim
After a precipitous drop of 20.4%, Warner (Nasdaq:WCRX) is now trading at a share price of $13.45. The company is currently trading a volume of 2.8 million shares. Volume indicates the level of interest that investors have in a company at its current price. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. WCRX's PEG ratio is 3.83. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
MAKO (Nasdaq:MAKO) has risen 9.5% to hit a current price of $17.02 per share. So far today, the company's volume is 2.5 million shares, 2.2 times the current three-month average. 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 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 MAKO is 7.81, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Increasing 4.4%, Cyberonics (Nasdaq:CYBX) is trading at $48.39 per share. This morning, the company's volume is 555,407 shares. This is two times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. CYBX has a high P/S ratio of 4.83. 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 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 2%, Theravance (Nasdaq:THRX) has hit a share price of $26.65. So far today, the company's volume is 77,949 shares, lighter than yesterday's volume of 330,404 shares. 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. The debt ratio shows the proportion of assets that a company is financing through debt. THRX has a debt ratio of 52.6%. 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.
WellCare Health Plans (NYSE:WCG) is up 1.8% to reach a current price of $57.29 per share. This morning, the company is trading a volume of 276,141 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. WCG has a PEG ratio of 1.13, which is consistent with the industry average. 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.
Thoratec (Nasdaq:THOR) is currently trading at $33.38 per share, a 1.8% increase. With 171,997 shares changing hands so far today, the company's volume is consistent with its average over the last three months. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. THOR's P/E ratio of 24.7 is under the industry average of 43.98. 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 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
Covance (NYSE:CVD) is currently trading at $48.22 per share, a 1.2% increase. So far today, the company's volume is 65,362 shares. This is 0.2 times its current daily average. If a stock price moves on high volume, this means that the change is a significant one. 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. The debt-equity (D/E) ratio is a leverage ratio. CVD has a debt-equity ratio of 28%, which is on the low side. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
While the market overall has shown little change, the Healthcare sector (XLV) is up 0.3% and its current biggest movers are:
| Company | Market Cap | Percentage Change |
| Warner (Nasdaq:WCRX) | $4.23 billion | -20.4% |
| MAKO (Nasdaq:MAKO) | $663.7 million | +9.5% |
| Cyberonics (Nasdaq:CYBX) | $1.28 billion | +4.4% |
| Theravance (Nasdaq:THRX) | $2.63 billion | -2% |
| WellCare Health Plans (NYSE:WCG) | $2.43 billion | +1.8% |
| Thoratec (Nasdaq:THOR) | $1.93 billion | +1.8% |
| Covance (NYSE:CVD) | $2.62 billion | +1.2% |
After a precipitous drop of 20.4%, Warner (Nasdaq:WCRX) is now trading at a share price of $13.45. The company is currently trading a volume of 2.8 million shares. Volume indicates the level of interest that investors have in a company at its current price. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. WCRX's PEG ratio is 3.83. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
MAKO (Nasdaq:MAKO) has risen 9.5% to hit a current price of $17.02 per share. So far today, the company's volume is 2.5 million shares, 2.2 times the current three-month average. 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 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 MAKO is 7.81, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Increasing 4.4%, Cyberonics (Nasdaq:CYBX) is trading at $48.39 per share. This morning, the company's volume is 555,407 shares. This is two times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. CYBX has a high P/S ratio of 4.83. 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 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.
WellCare Health Plans (NYSE:WCG) is up 1.8% to reach a current price of $57.29 per share. This morning, the company is trading a volume of 276,141 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. WCG has a PEG ratio of 1.13, which is consistent with the industry average. 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.
Thoratec (Nasdaq:THOR) is currently trading at $33.38 per share, a 1.8% increase. With 171,997 shares changing hands so far today, the company's volume is consistent with its average over the last three months. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. THOR's P/E ratio of 24.7 is under the industry average of 43.98. 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 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
Covance (NYSE:CVD) is currently trading at $48.22 per share, a 1.2% increase. So far today, the company's volume is 65,362 shares. This is 0.2 times its current daily average. If a stock price moves on high volume, this means that the change is a significant one. 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. The debt-equity (D/E) ratio is a leverage ratio. CVD has a debt-equity ratio of 28%, which is on the low side. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
by
Investopedia Staff
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