The market is currently up, with the Nasdaq increasing 0.5%, the S&P 500 up 0.3% and the Dow climbing 0.1%. The technology sector is a category of stocks relating to the research, development and/or distribution of technologically based goods and services. This sector contains businesses revolving around the manufacturing of electronics, creation of software, computers or products and services relating to information technology. The technology sector offers a wide arrange of products and services for both customers and other businesses. Consumer goods like personal computers, stereos and televisions are continually improved and upgraded, offering the latest technology to all users. Businesses receive information and services from software and database systems, which allow the companies to make strategic business decisions.
The Technology sector (XLK) is up 0.5%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Universal (Nasdaq:PANL)||$1.98 billion||-9.1%|
|Deltek (Nasdaq:PROJ)||$959.2 million||-7.7%|
|Kayak (Nasdaq:KYAK)||$1.08 billion||-5%|
|Maxim Integrated Products (Nasdaq:MXIM)||$8.22 billion||-4%|
|Ultimate Software Group (Nasdaq:ULTI)||$2.57 billion||+3.1%|
|Mellanox (Nasdaq:MLNX)||$4.75 billion||+2.8%|
|Sohu.com (Nasdaq:SOHU)||$1.64 billion||-2.8%|
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Currently trading at $38.85 per share, Universal (Nasdaq:PANL) has fallen 9.1%. This morning, 2.7 million shares have been traded, whereas yesterday, volume was only 702,681 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. 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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). PANL's PEG ratio is 2.92. 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.
Falling 7.7%, Deltek (Nasdaq:PROJ) is currently at a share price of $12.93. So far today, the company's volume is 825,910 shares. This is 15.6 times its current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. PROJ's stock is trading for more than its book value with a P/B ratio of 19.89. This may be a sign that the company is overvalued. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: How Buybacks Warps The Price-To-Book Ratio
At $27.35, Kayak (Nasdaq:KYAK) has slipped 5%. The company's volume is currently 43,342 shares for the day, 0.1 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for KYAK is a low 12.9%. A low debt ratio means the company has more available cash flow. 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.
Maxim Integrated Products (Nasdaq:MXIM) is down 4% to reach $27.03 per share. So far today, 1.7 million shares have changed hands. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The debt-equity ratio of 12% is relatively low. 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. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Ultimate Software Group (Nasdaq:ULTI) is currently trading at $98.98 per share, a 3.1% increase. So far today, the company's volume is 116,072 shares,. The trading volume for a stock indicates the level of investor interest. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. ULTI has a P/E ratio of 400.1, high compared to the industry average of 10.32. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
Mellanox (Nasdaq:MLNX) has increased to a share price of $117.50, a 2.8% rise. So far today, 362,328 shares have changed hands. This is in keeping with the average volume over the past three months. Volume is an important indicator because it indicates how significant a price shift is. Valuation ratios like 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 are useful in determining how attractive a potential or existing investment is. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. PEG ratio for MLNX is 3.57. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After a decline of 2.8%, Sohu.com (Nasdaq:SOHU) has hit a share price of $41.96. At 484,879 shares, the company's volume so far today is in keeping with its current daily 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. SOHU's P/B ratio of 1.56 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. 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: Investment Valuation Ratios: Price/Book Value Ratio
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.