The Nasdaq has climbed 1.1%, the S&P 500 has risen 0.6% and the Dow is up 0.4% on a good day for the market so far. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.
The Financial sector (XLF) is up 1%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|ICICI Bank Limited (NYSE:IBN)||$20.97 billion||+6.2%|
|Ameriprise (NYSE:AMP)||$12.25 billion||+4%|
|Banco de Chile (NYSE:BCH)||$12.62 billion||-3.8%|
|Shinhan Financial Group Co., Ltd (NYSE:SHG)||$15.66 billion||+3.5%|
|Virtus Investment Partners (Nasdaq:VRTS)||$708.8 million||+2.6%|
|IntercontinentalExchange (NYSE:ICE)||$9.96 billion||+2.2%|
|Nationstar Mortgage Holdings (NYSE:NSM)||$2.57 billion||-2.2%|
Broker Summary: Fidelity Online Brokerage
ICICI Bank Limited (NYSE:IBN) has risen 6.2% and is currently trading at $38.62 per share. The company's volume for the day so far is 1.4 million shares. This is on pace to reach yesterday's trading volume of 2.9 million shares. Volume is an important indicator because it indicates how significant a price shift is. 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/book value ratio is calculated by dividing the current stock price by the company's book value per share. IBN's P/B ratio of 1.97 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
Ameriprise (NYSE:AMP) is at $60.43 per share after an increase of 4%. The company's volume is currently one million shares for the day, one times its current daily average. A stock's volume conveys how excited investors are about it. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). AMP's P/E ratio of 13.3 falls below the industry average of 21.42. 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 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: Can Investors Trust the P/E Ratio?
At $82.73, Banco de Chile (NYSE:BCH) has slipped 3.8%. The company is currently trading a volume of 55,042 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. 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/sales ratio measures a company's stock market price by its revenues. The P/S ratio for BCH is a high 3.13. 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 an increase of 3.5%, Shinhan Financial Group Co., Ltd (NYSE:SHG) has reached a current price of $68.35. At 31,004 shares, the company's volume so far today is 1.2 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. SHG's debt ratio of 91.4% is fairly high. As such, the company is highly leveraged and not highly liquid. 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.
After rising 2.6%, Virtus Investment Partners (Nasdaq:VRTS) is currently trading at a share price of $92.88. So far today, 6,747 shares of the company's stock have changed hands. This is on pace to fall short of yesterday's volume of 21,895 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. 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. 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. VRTS' debt-equity ratio of 10% is on the low end. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. 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.
Rising 2.2%, IntercontinentalExchange (NYSE:ICE) is currently trading at $139.91 per share. So far today, the company's volume is 372,943 shares, 0.6 times the average daily volume. The trading volume for a stock indicates the level of investor interest. 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. ICE has a low capitalization ratio of 20.7%. 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.
Nationstar Mortgage Holdings (NYSE:NSM) is currently trading at a share price of $28.16, a 2.2% decline. So far today, the company's volume is 303,992 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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 price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. The P/B ratio for NSM is 3.97, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: How Buybacks Warps The Price-To-Book Ratio
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.