The morning has been good for the market. The Nasdaq has moved up 0.1%; the S&P 500 is trading up 0.2%; and the Dow has risen 0.3%. 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 0.4% and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|PDC Energy (Nasdaq:PDCE)||$996.1 million||-5.4%|
|Clayton Williams Energy (Nasdaq:CWEI)||$714.7 million||-4.7%|
|Approach Resources (Nasdaq:AREX)||$1.09 billion||-3.3%|
|Berry Petroleum (NYSE:BRY)||$2.24 billion||-3%|
|Pioneer Southwest Energy Partners (NYSE:PSE)||$900 million||+2.7%|
|InterOil Corporation (NYSE:IOC)||$4.12 billion||+2.5%|
|Marathon (NYSE:MPC)||$17.62 billion||+2.4%|
Forex Broker Summary: Forex Capital Markets (FXCM)
PDC Energy (Nasdaq:PDCE) is down 5.4% to reach $31.13 per share. So far today, 679,248 shares have changed hands. 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. 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. PDCE has a D/E ratio of 69%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Clayton Williams Energy (Nasdaq:CWEI) has fallen 4.7% and is currently trading at $56 per share. The company's volume for the day so far is 23,587 shares, in keeping with its current three-month average. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for CWEI is 1.77, indicating that the stock is trading for more 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. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Currently trading at $31.57 per share, Approach Resources (Nasdaq:AREX) has fallen 3.3%. The company is trading at a volume of 289,700 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. Compared to the industry average of 16.77, AREX's P/E ratio of 163.3 is quite high. This could mean that the market is expecting big things over the next few months or years. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: The P/E Ratio: A Good Market-Timing Indicator
Slipping 3%, Berry Petroleum (NYSE:BRY) is currently trading at $40.14 per share. The company's volume is currently 377,723 shares for the day, 0.7 times the current daily average. 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. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for BRY is 68.2%, which is relatively 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.
Pioneer Southwest Energy Partners (NYSE:PSE) has risen 2.7% to hit a current price of $25.89 per share. The company's volume for the day so far is 70,208 shares. A stock's volume conveys how excited investors are about it. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for PSE is a high 4.54. 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.
Increasing 2.5%, InterOil Corporation (NYSE:IOC) is trading at $87.27 per share. At 652,172 shares, the company's volume so far today is 0.7 times the current three-month average. Volume indicates the level of interest that investors have in a company at its current price. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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. IOC's capitalization ratio is 10.7%, which is relatively low. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. 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.
After rising 2.4%, Marathon (NYSE:MPC) is currently trading at a share price of $53.33. So far today, 1.3 million shares of the company's stock have changed hands. This is on pace to fall short of yesterday's volume of 6.5 million shares. 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 can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. PEG ratio for MPC is consistent with the industry average at 1.0. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.