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Tickers in this Article: FNGN, ACTG, ECPG, SAFT, MET, OCN, LNC
The morning has been bad for the market. The Nasdaq has slipped 0.4%; the S&P 500 is trading down 0.8%; and the Dow is down 0.8%. 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 currently lagging behind the overall market, down 1.2%, and its current biggest movers are:
CompanyMarket CapPercentage Change
Financial Engines Inc (Nasdaq:FNGN)1.2 million+10.5%
Acacia Research Corporation (Nasdaq:ACTG).34 billion-8%
Encore Capital Group, Inc. (Nasdaq:ECPG)1.1 million+6.1%
Safety Insurance Group, Inc. (Nasdaq:SAFT)3.5 million+6.1%
MetLife (NYSE:MET).32 billion+5.9%
Ocwen Financial Corporation (NYSE:OCN).6 billion+5.9%
Lincoln National (NYSE:LNC).66 billion+5.7%
Broker Summary: TD Ameritrade Thinkorswim

Financial Engines (Nasdaq:FNGN) rose a significant 10.5% to reach $20.06 per share. The company's volume for the day so far is 229,488 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Valuation ratios allow the investor to make a quick determination as to a company's investment value. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). FNGN has a P/E ratio of 55.0, high compared to the industry average of 14.81. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Can Investors Trust the P/E Ratio?

Falling 8%, Acacia (Nasdaq:ACTG) is currently at a share price of $24.73. With 1.2 million shares changing hands so far today, the company's volume is 0.9 times the current three-month average. 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 provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. The P/B ratio for ACTG is 1.98, indicating that the stock is trading for more than its book value. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Encore Capital Group (Nasdaq:ECPG) is currently trading at $29.26 per share, a 6.1% increase. So far today, 109,445 shares of the company's stock have changed hands. Yesterday, volume was only 96,204 shares. Volume is an important indicator because it indicates how significant a price shift is. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for ECPG is a high 1.14. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

After rising 6.1%, Safety Insurance Group (Nasdaq:SAFT) is currently trading at a share price of $44.60. So far today, the company's volume is 12,121 shares, consistent with its current daily average. Volume indicates the level of interest that investors have in a company at its current price. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. SAFT's debt ratio is 54.9%. 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.

Increasing 5.9%, MetLife (NYSE:MET) is trading at $32.22 per share. So far today, 8.2 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. 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. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). MET's PEG ratio of 0.53 is in line with the industry average. 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.

Ocwen (NYSE:OCN) has risen 5.9% to hit a current price of $20.42 per share. So far today, the company's volume is 2.3 million shares, 2.1 times its current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. OCN has a high capitalization ratio of 61.8%. A company considered too highly leveraged (too much debt) may find its freedom of action restricted by its creditors and/or have its profitability hurt by high interest costs. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Rising 5.7%, Lincoln (NYSE:LNC) is currently trading at $20.97 per share. The company's volume for the day so far is 3.4 million shares. This is greater than yesterday's volume of 3.3 million shares. If a stock price moves on high volume, this means that the change is a significant one. 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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. Compared to the industry average of 12.22, LNC's P/E ratio of 29.2 is quite high. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. 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: Understanding The P/E 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. 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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