The Nasdaq has climbed 0.6%, the S&P 500 is up 0.3% and the Dow has risen 0.3%, marking a bad morning for the market. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.
The Healthcare sector (XLV) is up 0.3%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Pacira Pharmaceuticals Inc (Nasdaq:PCRX)||$505.1 million||+6.3%|
|Spectrum Pharmaceuticals, Inc. (Nasdaq:SPPI)||$761.5 million||-2.8%|
|Vertex Pharmaceuticals Incorporated (Nasdaq:VRTX)||$11.1 billion||+2.4%|
|Teleflex Incorporated (NYSE:TFX)||$2.56 billion||+2.4%|
|Novo Nordisk A/S (ADR) (NYSE:NVO)||$90.16 billion||+2.2%|
|Insulet Corporation (Nasdaq:PODD)||$978 million||-2%|
|Valeant Pharmaceuticals Int (USA) (NYSE:VRX)||$14.89 billion||+1.8%|
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Pacira Pharmaceuticals (Nasdaq:PCRX) is at $16.56 per share after an increase of 6.3%. So far today, the company's volume is 72,431 shares. This is about the same trading activity as there was yesterday. If a stock price moves on high volume, this means that the change is a significant one. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio is calculated by dividing total liabilities by total assets. PCRX has a high debt ratio of 60.5%. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. 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.
Spectrum Pharmaceuticals (Nasdaq:SPPI) is trading at $12.28 per share, down 2.8%. So far today, the company's volume is 707,563 shares, 0.3 times the average volume over the last three months. 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. 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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. Compared to the industry average of 2.2, SPPI's P/E ratio of 9.0 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. 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: Profit With The Power Of Price-To-Earnings
Vertex Pharmaceuticals (Nasdaq:VRTX) has increased to a share price of $52.67, a 2.4% rise. So far today, the company's volume is 414,735 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 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. VRTX has a low debt-equity ratio of 39%. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. 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.
Teleflex (NYSE:TFX) is up 2.4% to reach a current price of $64.19 per share. So far today, the company's volume is 172,728 shares, 1.1 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 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 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. TFX's stock is trading for more than its book value with a P/B ratio of 1.55. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. 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: Investment Valuation Ratios: Price/Book Value Ratio
Rising 2.2%, Novo Nordisk A/S (NYSE:NVO) is currently trading at $158.93 per share. The company's volume for the day so far is 150,459 shares. This is about the same trading activity as there was yesterday. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. NVO has a dividend yield of 1.2%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Dividend Yield For The Downturn
Insulet (Nasdaq:PODD) has decreased to $19.98 per share, a 2% fall. With 43,684 shares changing hands so far today, the company's volume is 0.1 times its current three-month average. Volume is used to evaluate how meaningful the price movement of a stock 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 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. PODD's P/S ratio of 5.37 is on the high side. 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.
Valeant Pharmaceuticals Int (NYSE:VRX) has moved up 1.8% and is currently trading at $50.88 per share. The company's volume for the day so far is 579,855 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for VRX is 73.6%, which is relatively high. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.