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Tickers in this Article: NFLX, CATO, YELP, KSS, LTD, ROST, BKE
So far today, the Nasdaq has risen 0.3%, the S&P 500 is down 0.2% and the Dow is trading down 0.1%.

The biggest movers in the Services sector (IYC) (+0.5%) are:
CompanyMarket CapPercentage Change
Netflix (Nasdaq:NFLX)$4 billion+11.8%
Cato Corp (NYSE:CATO)$928.4 million-10.3%
Yelp Inc (NYSE:YELP)$1.51 billion+8.9%
Kohl\'s (NYSE:KSS)$10.61 billion+7.3%
Limited Brands (NYSE:LTD)$12.85 billion+7.3%
Ross Stores (Nasdaq:ROST)$14.16 billion+6.8%
The Buckle, Inc. (NYSE:BKE)$1.9 billion-5.4%
Forex Broker Summary: UFXMarkets

Netflix (Nasdaq:NFLX) is currently at $80.51 per share after a dramatic increase of 11.8%. This morning, the company is trading a volume of 6.6 million 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. The gross profit margin for NFLX is 66.1%. A company's operating margin is calculated by dividing operating income by revenues. Operating margin for NFLX is -0.2%. This shows that the company reported a net operating loss in the most recent quarter. Net profit margins are those generated from all phases of a business, including taxes. With a net profit margin of 4.8%, the company has a high one compared to its gross profit margin. Companies with high net profit margins have a bigger cushion to protect themselves during the hard times.

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). NFLX's P/E ratio of 24.3 is above the industry average of 0.85. This could mean that the market is expecting big things over the next few months or years. 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

Cato (NYSE:CATO) is at a share price of $28.43 after a sharp decline of 10.3%. The company's volume is currently 203,419 shares for the day, more than yesterday's 106,161 shares. A stock's volume conveys how excited investors are about it. 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. CATO's gross profit margin is 38.2%. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. Relative to its gross profit margin, CATO's operating margin of 18.6% is on the low side. 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. The company has a net profit margin of 7.1%.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. 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. The P/B ratio for CATO is 2.12, 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. 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: Using The Price-To-Book Ratio To Evaluate Companies

Yelp (NYSE:YELP) is at $26.93 per share after an increase of 8.9%. The company is currently trading a volume of 804,862 shares. This is 1.5 times its average volume 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. 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. YELP has an operating profit margin of -35.6%. This is because the company reported a net operating loss in the most recent quarter.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for YELP is a low 8.1%. 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.

Kohl's (NYSE:KSS) has risen 7.3% and is currently trading at $47.51 per share. At 3.8 million shares, the company's volume so far today is in keeping with its current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin ratios highlight companies that are worth further examination. The gross profit margin for KSS is 37.9%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. KSS' operating profit margin is 7.6%. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. Net profit margin for the company is 5.9%.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The dividend yield is calculated by dividing a company's dividends per share by its stock price. Dividend yield for KSS is 2.9%. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Guide To Stock-Picking Strategies: Income Investing

Limited Brands (NYSE:LTD) has moved up 7.3% and is currently trading at $47.38 per share. So far today, 2.7 million shares have changed hands. Volume is used to evaluate how meaningful the price movement of a stock is. 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. LTD's gross profit margin is 43.4%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. LTD has an operating profit margin of 13.6%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. Net margin is 7.9%.

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 is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. LTD's capitalization ratio of 103% is relatively high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Rising 6.8%, Ross (Nasdaq:ROST) is currently trading at $67.06 per share. This morning, two million shares have been traded, below yesterday's volume of 2.4 million shares. Volume indicates the level of interest that investors have in a company at its current price. 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 ROST is 29.4%. ROST has an operating profit margin of 14.3% and a net profit margin of 7.8%, both low compared to its gross profit margin.

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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. ROST has a P/E ratio of 20.6, high compared to the industry average of 16.62. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Profit With The Power Of Price-To-Earnings

Buckle (NYSE:BKE) is currently trading at a share price of $37.53, a 5.4% decline. So far today, the company's volume is 449,532 shares. This is 1.2 times the average volume over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin analysis is a great way to understand the profitability of companies. BKE has a gross profit margin of 44.2%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. With an operating profit margin of 22%, BKE has a low one relative to its gross profit margin. Net profit margin is calculated by dividing net income by sales. The company's net profit margin is 14.3%.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). BKE's PEG ratio of 1.27 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.

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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