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Tickers in this Article: CAVM, KLAC, CYMI, LRCX, UTEK, MLNX, ASML
The Nasdaq is trading down 1.7%, the S&P 500 has slipped 1.3% and the Dow has decreased 1.4% on a bad morning for the market.

The Semiconductors sector (XLK) is down 2%, underperforming the market overall. The current biggest movers in the sector are:
CompanyMarket CapPercentage Change
Cavium Inc (Nasdaq:CAVM)$1.37 billion-5.8%
KLA-Tencor (Nasdaq:KLAC)$8.17 billion-4.8%
Cymer, Inc. (Nasdaq:CYMI)$1.85 billion-4.8%
Lam Research Corporation (Nasdaq:LRCX)$4.45 billion-4.6%
Ultratech, Inc. (Nasdaq:UTEK)$842.6 million-4.6%
Mellanox Technologies, Ltd. (Nasdaq:MLNX)$3.05 billion-4%
ASML Holding N.V. (ADR) (Nasdaq:ASML)$22.33 billion-3.9%
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Cavium (Nasdaq:CAVM) has decreased to $25.95 per share, a 5.8% fall. The company's volume for the day so far is 304,218 shares. This is less trading activity than there was yesterday. In technical analysis, trading volume is used to determine the strength of a market indicator. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. The gross profit margin for CAVM is 56.7%. The operating and net profit margins for CAVM are both negative. This is because the company reported a net loss and net operating loss in the most recent quarter.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The debt-equity (D/E) ratio is a leverage ratio. CAVM's debt-equity ratio of 1% is on the low end. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. 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.

KLA-Tencor (Nasdaq:KLAC) is down 4.8% to reach $46.44 per share. The company's volume for the day so far is 1.6 million share, 0.8 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. KLAC has a gross profit margin of 61.1%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. KLAC's operating profit margin is 33.8%. Net profit margin examines how effectively a company is managed and how profitable it is by looking at how much of each dollar in revenues ultimately hits the company's bottom line. Net profit margin for the company is 23.7%.

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 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. KLAC's PEG ratio of 0.92 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.

Cymer (Nasdaq:CYMI) is currently trading at a share price of $56.92, a 4.8% decline. The company's volume for the day so far is 150,924 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. The gross profit margin for CYMI is 54.7%. Investors trying to assess a company's ability to continue to pay its fixed expenses even if its business declines may want to evaluate the operating margin ratio. CYMI has an operating profit margin of 11.1%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. Net margin is 12.4%.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. CYMI's P/B ratio of 2.27 shows that its share price is higher 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. 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

Lam (Nasdaq:LRCX) has fallen 4.6% and is currently trading at $35.27 per share. At 2.5 million shares, the company's volume so far today is 0.8 times its current daily average. 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. Margin ratios highlight companies that are worth further examination. LRCX has a gross profit margin of 46.1%. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. LRCX's operating profit margin is 8.8%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company has a net profit margin of 10.3%.

When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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 LRCX is a high 2.0. This could be a good sign if the share price increases. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.

Currently trading at $30.68 per share, Ultratech (Nasdaq:UTEK) has fallen 4.6%. The company is trading at a volume of 27,058 shares. This is below yesterday's volume of 80,800 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. UTEK's gross profit margin is 55.9%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). UTEK has an operating profit margin of 22.7%. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. Net profit margin for the company is 19.4%.

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 debt ratio is calculated by dividing total liabilities by total assets. UTEK has a low debt ratio of 14.9%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After a decline of 4%, Mellanox (Nasdaq:MLNX) has hit a share price of $73.71. At 258,097 shares, the company's volume so far today is 0.3 times its average over the past 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 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. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. The gross profit margin for MLNX is 72.6%. MLNX has an operating profit margin of 14.9% and a net profit margin of 8.2%, both high compared to its gross profit margin.

Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). The P/E ratio for MLNX is 125.0, above the industry average of 14.53. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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

Slipping 3.9%, ASML Holding N.V (Nasdaq:ASML) is currently trading at $49.77 per share. So far today, the company's volume is 659,562 shares. The trading volume for a stock indicates the level of investor interest. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. ASML's gross profit margin is 45.8%. Compared with its gross profit margin, ASML's operating profit margin of 25.8% and net profit margin of 24.9% are low.

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 capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. ASML has a low capitalization ratio of 16.9%. Investors generally consider a company with low debt and high equity levels is a good quality investment. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.

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.

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