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Tickers in this Article: ISIS, AMRN, LH, PCYC, TARO, VVUS, DGX
It's been a good morning for the market. The Nasdaq is up 1.1%; the S&P 500 has climbed 0.3%; and the Dow has moved up 0.3%. 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.

Despite a good day for the overall market so far, the Healthcare sector (XLV) is down 0.2% and its current biggest movers are:
CompanyMarket CapPercentage Change
ISIS Pharmaceuticals, Inc. (Nasdaq:ISIS)$1.41 billion-10.4%
Amarin Corporation plc (ADR) (Nasdaq:AMRN)$1.99 billion+6.9%
LabCorp (NYSE:LH)$9.06 billion-6.5%
Pharmacyclics, Inc. (Nasdaq:PCYC)$3.63 billion-5.9%
Taro Pharmaceutical Industries Ltd. (NYSE:TARO)$1.59 billion+5%
VIVUS, Inc. (Nasdaq:VVUS)$2.89 billion-4.3%
Quest Diagnostics (NYSE:DGX)$10 billion-4%
Forex Broker Summary: Forex Capital Markets (FXCM)

ISIS Pharmaceuticals (Nasdaq:ISIS) is currently trading at $12.57 per share, after a steep drop of 10.4%. The company's volume is currently 831,353 shares for the day, 0.7 times its current daily average. If a stock price moves on high volume, this means that the change is a significant one. 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 operating and net profit margins for ISIS are both negative. This is because the company reported a net loss and net operating loss in the most recent quarter.

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. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. ISIS has a D/E ratio of 146%, which is relatively high. Companies in capital-intensive industries usually have higher D/E ratios because they need to buy more property, plants, and equipment to operate. 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.

Amarin Corporation plc (Nasdaq:AMRN) is currently trading at $15.67 per share, a 6.9% increase. So far today, the company's volume is 9.1 million shares. Volume is an important indicator because it indicates how significant a price shift is. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. Relative to the industry P/E ratio of 16.97, AMRN's 8.7 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: Can Investors Trust the P/E Ratio?

LabCorp (NYSE:LH) is trading at $87.56 per share, down 6.5%. So far today, the company's volume is 1.4 million shares, 1.6 times its current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. LH has a gross profit margin of 39.3%. 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. Relative to its gross profit margin, LH's operating margin of 20.2% is on the low side. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. Net profit margin for the company is 9.9%.

A company's value as an investment is more easily 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 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 LH is 1.33. 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.

Slipping 5.9%, Pharmacyclics (Nasdaq:PCYC) is currently trading at $49.42 per share. So far today, 1.3 million shares of the company's stock have changed hands. This is greater than yesterday's volume of 871,931 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. Margin analysis is a great way to understand the profitability of companies. PCYC's operating profit margin is -932.1%. This means that the company came in with a net operating loss in the most recent quarter.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. PCYC has a low debt ratio of 38.1%. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Taro Pharmaceutical (NYSE:TARO) has moved up 5% and is currently trading at $37.48 per share. So far today, the company's volume is 21,033 shares, 2.1 times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin ratios highlight companies that are worth further examination. The gross profit margin for TARO is 70.7%. The operating profit margin indicates how much EBIT is generated per dollar of sales. TARO's operating profit margin is 45.6%. 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. Net margin is 37.7%.

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/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. TARO has a high P/S ratio of 3.12. 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.

VIVUS (Nasdaq:VVUS) has fallen 4.3% and is currently trading at $27.76 per share. The company's volume for the day so far is 4.3 million 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. 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 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 VVUS is 8.49, 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Using The Price-To-Book Ratio To Evaluate Companies

After a decline of 4%, Quest Diagnostics (NYSE:DGX) has hit a share price of $60.52. With 1.3 million shares changing hands so far today, the company's volume is in keeping with the average volume over the past 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. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. DGX's gross profit margin is 44.9%. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. DGX has an operating profit margin of 15.5%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company has a net profit margin of 9.5%.

Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. DGX's D/E ratio of 101% is on the high side. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

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