The market has been doing well after the morning's trading. The Nasdaq has moved up 1.4%; the S&P 500 is up 1.1%; and the Dow has risen 0.8%.
Underperforming the market overall, the Services sector (IYC) is up 1.2%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|Expedia (Nasdaq:EXPE)||$5.81 billion||+25.1%|
|Higher One Holdings, Inc (NYSE:ONE)||$632.7 million||-12.9%|
|Coinstar, Inc. (Nasdaq:CSTR)||$1.85 billion||-12.5%|
|Huron Consulting Group (Nasdaq:HURN)||$703.1 million||+7.9%|
|Entertainment Properties Trust (NYSE:EPR)||$1.99 billion||+7.2%|
|Liquidity Services, Inc. (Nasdaq:LQDT)||$1.28 billion||+5.8%|
|Amazon.com (Nasdaq:AMZN)||$99.12 billion||+5.8%|
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Expedia (Nasdaq:EXPE) has soared 25.1% to reach a current price of $57.19 per share. This morning, the company's volume is 10.6 million shares. This is 3.1 times its average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. EXPE has a P/B ratio of 3.55 which shows that its share price is higher 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: Using The Price-To-Book Ratio To Evaluate Companies
Shares of Higher One Holdings (NYSE:ONE) are currently trading at $10.06, a steep decline of 12.9%. So far today, 670,433 shares have changed hands, whereas yesterday, volume was only 140,731 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. 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/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. ONE has a PEG ratio of 0.88, which is consistent 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.
Coinstar (Nasdaq:CSTR) is at a share price of $51.79 after a sharp decline of 12.5%. The company is currently trading a volume of 6.5 million shares. Volume indicates the level of interest that investors have in a company at its current price. 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). The P/E ratio for CSTR is 12.7, above the industry average of 7.19. 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. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?
After rising 7.9%, Huron Consulting (Nasdaq:HURN) is currently trading at a share price of $33.09. With 84,166 shares changing hands so far today, the company's volume is 0.7 times its current three-month average. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. HURN's P/S ratio of 1.13 is on the high side. 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.
Entertainment (NYSE:EPR) is at $45.52 per share after an increase of 7.2%. The company's volume for the morning is 190,602 shares. This is 0.8 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. EPR has a debt ratio of 48.1%, which is fairly low. 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. 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.
Liquidity Services (Nasdaq:LQDT) is up 5.8% to reach a current price of $43.56 per share. The company's volume is currently 263,988 shares for the day, on pace to reach yesterday's volume of 500,043 shares. 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. LQDT's debt-equity ratio of 17% 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. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Amazon.com (Nasdaq:AMZN) has risen 5.8% and is currently trading at $232.80 per share. So far today, the company's volume is six million shares. Volume is an important indicator because it indicates how significant a price shift is. 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 is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for AMZN is 14.42, indicating that the stock is trading for more 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
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.