The morning has been bad for the market. The Nasdaq has fallen 0.1%; the S&P 500 has declined 0.1%; and the Dow is trading down 0.1%. 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.
As with the overall market, the Financial sector has shown little movement, but here are its current biggest movers:
|Company||Market Cap||Percentage Change|
|ICICI Bank Limited (NYSE:IBN)||$19.67 billion||-2.7%|
|MarketAxess Holdings (Nasdaq:MKTX)||$1.19 billion||+2.7%|
|Royal Bank of Canada (NYSE:RY)||$78.44 billion||+1.9%|
|Toronto-Dominion Bank (NYSE:TD)||$74.58 billion||+1.5%|
|Bank of Montreal (NYSE:BMO)||$37.66 billion||+1.5%|
|M&T Bank (NYSE:MTB)||$11.38 billion||-1.4%|
|HDFC Bank Limited (NYSE:HDB)||$26.53 billion||-1.3%|
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At $33.20, ICICI Bank Limited (NYSE:IBN) has slipped 2.7%. With 604,671 shares changing hands so far today, the company's volume is 0.6 times its average over the past three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. While investment valuation ratios are useful tools in estimating the attractiveness of an investment, remember that it is important to look at a company's historical performance and compare the company ratios with its competitors and industry overall. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. IBN's P/B ratio of 1.7 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Increasing 2.7%, MarketAxess Holdings (Nasdaq:MKTX) is trading at $32.83 per share. This morning, the company is trading a volume of 51,871 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. The dividend yield for MKTX is 1.4%, which is on the low end. If you are an income investor, this stock may not be attractive to you. A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. SEE: Investment Valuation Ratios: Dividend Yield
Royal Bank of Canada (NYSE:RY) is up 1.9% to reach a current price of $55.34 per share. At 342,205 shares, the company's volume so far today is 0.7 times the current daily average. A stock's volume conveys how excited investors are about it. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. The P/E ratio for RY is 17.4, above the industry average of 9.69. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Understanding The P/E Ratio
Toronto-Dominion Bank (NYSE:TD) has risen 1.5% and is currently trading at $82.83 per share. So far today, 251,421 shares of the company's stock have changed hands. This is greater than yesterday's volume of 161,255 shares. 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. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. TD's debt ratio of 94.3% is fairly high. This means that most of the company's assets are financed through debt. 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.
Bank of Montreal (NYSE:BMO) is currently trading at $59.07 per share, a 1.5% increase. The company's volume for the day so far is 261,619 shares, 0.9 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. 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. 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. BMO has a high P/S ratio of 1.96. This could be a good sign if the share price increases. 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.
Currently trading at $88.56 per share, M&T Bank (NYSE:MTB) has fallen 1.4%. So far today, 1.1 million shares have changed hands. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a 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. The capitalization ratio for MTB is 37.1%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
HDFC Bank Limited (NYSE:HDB) has fallen 1.3% and is currently trading at $33.77 per share. So far today, the company's volume is 176,896 shares, 0.3 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift 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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The D/E ratio for HDB is 74%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.
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