Semiconductors Stocks, Including Mellanox, Making Big Moves on September 24, 2012

By Investopedia Staff | September 24, 2012 AAA

The Nasdaq has fallen 0.7%, the S&P 500 has slipped 0.2% and the Dow has declined 0.2%, marking a bad morning for the market.

The Semiconductors sector (XLK) is currently ahead of the overall market, down only 0.7%, and its biggest movers are currently:

Company Market Cap Percentage Change
Rambus (Nasdaq:RMBS) $545.7 million +19.5%
Veeco Instruments (Nasdaq:VECO) $1.37 billion -9.2%
Cymer (Nasdaq:CYMI) $1.71 billion -5.6%
Universal (Nasdaq:PANL) $1.81 billion -5%
ASM International (Nasdaq:ASMI) $1.97 billion -4%
Mellanox (Nasdaq:MLNX) $4.41 billion -3.8%
Cirrus Logic (Nasdaq:CRUS) $2.71 billion -3.6%

Beginner's Guide To FXCM And Trading Station

Rambus (Nasdaq:RMBS) has soared 19.5% to reach a current price of $5.89 per share. The company's volume is currently 3.4 million shares. This is greater than yesterday's volume of 823,674 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 debt-equity (D/E) ratio is a leverage ratio. RMBS has a low debt-equity ratio of 37%. This shows that the company's assets are financed primarily through equity. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Veeco Instruments (Nasdaq:VECO) has fallen 9.2% and is currently trading at $31.74 per share. At 1.2 million shares, the company's volume so far today is 2.1 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. 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. A price/sales ratio is derived by dividing stock market price by company sales. VECO's P/S ratio of 1.83 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. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

Currently trading at $52.13 per share, Cymer (Nasdaq:CYMI) has fallen 5.6%. This morning, the company is trading a volume of 168,040 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). CYMI has a P/E ratio of 31.9, in line with the industry average. 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: Understanding The P/E Ratio

Universal (Nasdaq:PANL) is trading at $37.05 per share, down 5%. So far today, the company's volume is 544,484 shares, 0.9 times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for PANL is 4.88, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio

Slipping 4%, ASM International (Nasdaq:ASMI) is currently trading at $34.43 per share. The company's volume for the day so far is 3,962 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 ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for ASMI is 60.1%, which is relatively high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After a decline of 3.8%, Mellanox (Nasdaq:MLNX) has hit a share price of $106.80. The company's volume is currently 486,182 shares for the day, 0.3 times the current three-month average. 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for MLNX is 7.91, which is relatively high. This could be a good sign if the share price increases. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.

Cirrus Logic (Nasdaq:CRUS) is down 3.6% to reach $40.47 per share. So far today, the company's volume is 1.6 million shares. The trading volume for a stock indicates the level of investor interest. 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. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. Compared to the industry average of 14.34, CRUS' P/E ratio of 33.3 is quite high. 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: Profit With The Power Of Price-To-Earnings

The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.

comments powered by Disqus
Related Analysis
  1. Technical Look At eBay Inc
    Stock Analysis

    Technical Look At eBay Inc

  2. Priming the Pump for Q3 Earnings - Ahead of Wall Street
    Stock Analysis

    Priming the Pump for Q3 Earnings - Ahead of Wall Street

  3. Traders Have Seen This Movie Before
    Stock Analysis

    Traders Have Seen This Movie Before

  4. Bear of the Day: Stage Stores (SSI) - Bear of the Day
    Stock Analysis

    Bear of the Day: Stage Stores (SSI) - Bear of the Day

  5. Bull of the Day: Lands' End (LE) - Bull of the Day
    Stock Analysis

    Bull of the Day: Lands' End (LE) - Bull of the Day

Trading Center