The market is doing well so far today. The Nasdaq has increased 1.1%; the S&P 500 has risen 0.6%; and the Dow has moved up 0.4%.
Underperforming the market overall, the Services sector (IYC) is up 0.5%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|Liquidity Services (Nasdaq:LQDT)||$1.58 billion||+5.1%|
|Lumber Liquidators Holdings (NYSE:LL)||$1.37 billion||+5%|
|Sears (Nasdaq:SHLD)||$6.37 billion||+4.8%|
|Netflix (Nasdaq:NFLX)||$3.22 billion||+4.6%|
|Jones Lang LaSalle (NYSE:JLL)||$3.51 billion||+4.3%|
|Zumiez (Nasdaq:ZUMZ)||$915.9 million||-3.4%|
|Strayer Education (Nasdaq:STRA)||$797.8 million||+3.2%|
Broker Summary: Charles Schwab Online Brokerage
Liquidity Services (Nasdaq:LQDT) has risen 5.1% to hit a current price of $53.55 per share. The company is trading at a volume of 185,642 shares. This is a sign that there will be less trading activity than there was yesterday. If a stock price moves on high volume, this means that the change is a significant one.
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. LQDT has a high P/S ratio of 3.77. 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.
After an increase of 5%, Lumber Liquidators Holdings (NYSE:LL) has reached a current price of $53.30. So far today, the company's volume is 278,829 shares, 0.6 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. PEG ratio for LL is consistent with the industry average at 2.25. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Sears (Nasdaq:SHLD) is at $62.68 per share after an increase of 4.8%. The company's volume for the day so far is 578,970 shares. A stock's volume conveys how excited investors are about it.
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. The P/B ratio for SHLD is 1.48, indicating that the stock is trading for more than its book value. 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: How Buybacks Warps The Price-To-Book Ratio
After rising 4.6%, Netflix (Nasdaq:NFLX) is currently trading at a share price of $60.68. The company's volume for the day so far is 2.3 million shares, in keeping with the average volume over the past three months. 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. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. NFLX's P/E ratio of 31.4 is a little above the industry average of 30. A higher-than-industry P/E ratio may indicate that the market expects positive earnings growth and the company would have to work to live up to the high expectations. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap.
SEE: Investment Valuation Ratios: Price/Earnings Ratio
Rising 4.3%, Jones Lang LaSalle (NYSE:JLL) is currently trading at $83.15 per share. The company's volume for the day so far is 371,132 shares. In technical analysis, trading volume is used to determine the strength of a market indicator.
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. 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. JLL has a debt ratio of 53.9%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Zumiez (Nasdaq:ZUMZ) has fallen 3.4% and is currently trading at $28.21 per share. At 398,355 shares, the company's volume so far today is 0.3 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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 ZUMZ is 1.89, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Strayer Education (Nasdaq:STRA) has moved up 3.2% and is currently trading at $69.33 per share. The company is currently trading a volume of 30,048 shares. High volume indicates a lot of investor interest while low volume indicates the opposite.
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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. STRA has a high capitalization ratio of 50.3%. If the company is a company is in a highly competitive business and hobbled by high debt, it will find its competitors taking advantage of its problems to grab more market share. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.