Filed Under: ,
Tickers in this Article: WLL, IOC, HFC, SM, APU, TLP, CWEI
It's been a good morning for the market. The Nasdaq has climbed 0.3%; the S&P 500 has risen 0.1%; and the Dow is up 0.2%. The energy sector is the category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. Performance in the sector is largely driven by the supply and demand for worldwide energy. Energy producers will do very well during times of high oil and gas prices, but will earn less when the value of energy drops. Furthermore, this sector is sensitive to political events, which historically have driven changes in the price of oil.

Despite a good day for the overall market so far, the Energy sector (XLE) is down 0.2% and its current biggest movers are:
CompanyMarket CapPercentage Change
Whiting (NYSE:WLL)$5.81 billion+3.5%
InterOil Corporation (NYSE:IOC)$4.15 billion-3.3%
HollyFrontier (NYSE:HFC)$8.14 billion-2.2%
SM (NYSE:SM)$3.59 billion-2.1%
AmeriGas Partners (NYSE:APU)$4.01 billion-2%
TransMontaigne Partners (NYSE:TLP)$524.1 million+2%
Clayton Williams Energy (Nasdaq:CWEI)$691.5 million-1.8%
Beginner's Guide To Stockcharts.com

Rising 3.5%, Whiting (NYSE:WLL) is currently trading at $51.09 per share. So far today, 2.3 million shares have changed hands, whereas yesterday, volume was only 1.6 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for WLL is 30.3%. 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.

InterOil Corporation (NYSE:IOC) is trading at $83.01 per share, down 3.3%. The company is currently trading a volume of 396,213 shares. This is in keeping with its current three-month average. A stock's volume conveys how excited investors are about it. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. IOC's P/B ratio of 11.32 shows that its share price is higher 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

HollyFrontier (NYSE:HFC) is down 2.2% to reach $39.10 per share. The company's volume for the day so far is 834,096 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for HFC is 1.5%, which is on the low end. This could indicate that that the stock is overpriced or that future dividends might be higher. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Dividend Yield For The Downturn

At $53.95, SM (NYSE:SM) has slipped 2.1%. So far today, the company's volume is 185,886 shares, 0.2 times the current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. The P/S ratio for SM is 2.19, which is relatively high. This could be a good sign if the share price increases. 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.

After a decline of 2%, AmeriGas Partners (NYSE:APU) has hit a share price of $42.35. So far today, 28,650 shares of the company's stock have changed hands. At this rate, trading activity will likely be down from yesterday when 116,138 shares changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 debt ratio shows the proportion of assets that a company is financing through debt. APU has a debt ratio of 65.9%, which is on the high side. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. 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.

TransMontaigne Partners (NYSE:TLP) has risen 2% to hit a current price of $36.97 per share. So far today, the company's volume is 7,812 shares, 0.3 times its average over the past three months. 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). TLP's P/E ratio of 15.0 falls below the industry average of 34.14. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Profit With The Power Of Price-To-Earnings

Clayton Williams Energy (Nasdaq:CWEI) has fallen 1.8% and is currently trading at $55.82 per share. The company is currently trading a volume of 11,103 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. 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. CWEI has a high D/E ratio of 182%. Companies with high D/E ratios may have difficulty attracting additional investment capital. 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 On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

comments powered by Disqus

Trading Center