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Technology Stocks Making Big Moves on July 6, 2012
It's been a bad day for the market after the morning's trading. The Nasdaq is trading down 1.7%; the S&P 500 has slipped 1.3%; and the Dow has decreased 1.4%. The technology sector is a category of stocks relating to the research, development and/or distribution of technologically based goods and services. This sector contains businesses revolving around the manufacturing of electronics, creation of software, computers or products and services relating to information technology. The technology sector offers a wide arrange of products and services for both customers and other businesses. Consumer goods like personal computers, stereos and televisions are continually improved and upgraded, offering the latest technology to all users. Businesses receive information and services from software and database systems, which allow the companies to make strategic business decisions.
The Technology sector (XLK) is currently lagging behind the overall market, down 2%, and its current biggest movers are:
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Informatica (Nasdaq:INFA) is currently trading at $30.50 per share, after a steep drop of 29.7%. So far today, 14.7 million shares have changed hands. If a stock price moves on high volume, this means that the change is a significant one. Margin ratios highlight companies that are worth further examination. INFA has a gross profit margin of 85.3%, which is on the high end. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. INFA has an operating profit margin of 19.4% and a net profit margin of 15%, both high compared to its gross profit margin.
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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. INFA's P/B ratio of 3.12 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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
Taking a 11.5% hit, Teradata (NYSE:TDC) is currently trading at $64.29 per share. With 2.2 million shares changing hands so far today, the company's volume is 1.5 times the current three-month average. Volume is an important indicator because it indicates how significant a price shift 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. The gross profit margin for TDC is 59.5%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. TDC's operating profit margin is 20.7%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company's net profit margin is 15.4%.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio shows the proportion of assets that a company is financing through debt. TDC has a low debt ratio of 41.7%. A low debt ratio means the company has more available cash flow. 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.
Shares of MicroStrategy (Nasdaq:MSTR) are currently trading at $120.33, a steep decline of 10.8%. The company's volume for the day so far is 196,063 shares. Yesterday's volume was only 75,199 shares. Volume indicates the level of interest that investors have in a company at its current price. 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. MSTR's gross profit margin of 78.4% is fairly high. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. Operating margin for MSTR is 0.3% and net margin is 2.9%, both high relative to its gross margin.
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. 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 MSTR is 5.79. 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.
Falling 8.2%, Citrix (Nasdaq:CTXS) is currently at a share price of $76.93. The company's volume is currently 2.2 million shares for the day, 1.5 times the average daily volume. 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 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. CTXS has a high gross profit margin of 93%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Relative to its gross profit margin, CTXS' operating profit margin of 13.7% and net profit margin of 15.2% are high.
Understanding investment valuation ratios allows the investor to assess the true 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. CTXS' P/S ratio of 6.36 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.
F5 Networks (Nasdaq:FFIV) is down 7.3% to reach $94.06 per share. This morning, the company is trading a volume of 1.2 million 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. FFIV's gross profit margin of 84.5% is on the high side. This may indicate that the company is over-pricing its products and/or services. FFIV's operating margin of 30.8% and net margin of 20.9% are high relative to its gross margin.
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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. Compared to the industry average of 13.85, FFIV's P/E ratio of 30.6 is quite high. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: The P/E Ratio: A Good Market-Timing Indicator
VMware (NYSE:VMW) has fallen 6.9% and is currently trading at $84.01 per share. The company's volume is currently 1.3 million shares for the day, 0.6 times its current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. VMW has a gross profit margin of 91.9%, which is on the high end. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. VMW has an operating profit margin of 20.6% and a net profit margin of 19.8%, both high compared to its gross profit margin.
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. VMW has a low capitalization ratio of 8%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Currently trading at $135.15 per share, Salesforce.com (NYSE:CRM) has fallen 5.1%. So far today, the company's volume is 1.1 million shares. This is greater than yesterday's volume of 1.1 million shares. 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. 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. CRM has a high gross profit margin of 90.7%. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. CRM has negative operating and net profit margins. This is because the company reported a net loss and net operating loss in the most recent quarter.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual 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. CRM has a P/B ratio of 10.31 which 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. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Investment Valuation Ratios: Price/Book Value Ratio
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
The Technology sector (XLK) is currently lagging behind the overall market, down 2%, and its current biggest movers are:
| Company | Market Cap | Percentage Change |
| Informatica Corporation (Nasdaq:INFA) | $4.7 billion | -29.7% |
| Teradata (NYSE:TDC) | $12.25 billion | -11.5% |
| MicroStrategy Incorporated (Nasdaq:MSTR) | $1.46 billion | -10.8% |
| Citrix Systems (Nasdaq:CTXS) | $15.6 billion | -8.2% |
| F5 Networks, Inc. (Nasdaq:FFIV) | $8.05 billion | -7.3% |
| VMware (NYSE:VMW) | $38.54 billion | -6.9% |
| Salesforce.com (NYSE:CRM) | $19.65 billion | -5.1% |
Informatica (Nasdaq:INFA) is currently trading at $30.50 per share, after a steep drop of 29.7%. So far today, 14.7 million shares have changed hands. If a stock price moves on high volume, this means that the change is a significant one. Margin ratios highlight companies that are worth further examination. INFA has a gross profit margin of 85.3%, which is on the high end. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. INFA has an operating profit margin of 19.4% and a net profit margin of 15%, both high compared to its gross profit margin.
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 price/book value ratio is calculated by dividing the current stock price by the company's book value per share. INFA's P/B ratio of 3.12 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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
Taking a 11.5% hit, Teradata (NYSE:TDC) is currently trading at $64.29 per share. With 2.2 million shares changing hands so far today, the company's volume is 1.5 times the current three-month average. Volume is an important indicator because it indicates how significant a price shift 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. The gross profit margin for TDC is 59.5%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. TDC's operating profit margin is 20.7%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company's net profit margin is 15.4%.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio shows the proportion of assets that a company is financing through debt. TDC has a low debt ratio of 41.7%. A low debt ratio means the company has more available cash flow. 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.
Shares of MicroStrategy (Nasdaq:MSTR) are currently trading at $120.33, a steep decline of 10.8%. The company's volume for the day so far is 196,063 shares. Yesterday's volume was only 75,199 shares. Volume indicates the level of interest that investors have in a company at its current price. 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. MSTR's gross profit margin of 78.4% is fairly high. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. Operating margin for MSTR is 0.3% and net margin is 2.9%, both high relative to its gross margin.
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. 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 MSTR is 5.79. 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.
Falling 8.2%, Citrix (Nasdaq:CTXS) is currently at a share price of $76.93. The company's volume is currently 2.2 million shares for the day, 1.5 times the average daily volume. 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 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. CTXS has a high gross profit margin of 93%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Relative to its gross profit margin, CTXS' operating profit margin of 13.7% and net profit margin of 15.2% are high.
F5 Networks (Nasdaq:FFIV) is down 7.3% to reach $94.06 per share. This morning, the company is trading a volume of 1.2 million 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. FFIV's gross profit margin of 84.5% is on the high side. This may indicate that the company is over-pricing its products and/or services. FFIV's operating margin of 30.8% and net margin of 20.9% are high relative to its gross margin.
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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. Compared to the industry average of 13.85, FFIV's P/E ratio of 30.6 is quite high. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: The P/E Ratio: A Good Market-Timing Indicator
VMware (NYSE:VMW) has fallen 6.9% and is currently trading at $84.01 per share. The company's volume is currently 1.3 million shares for the day, 0.6 times its current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. VMW has a gross profit margin of 91.9%, which is on the high end. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. VMW has an operating profit margin of 20.6% and a net profit margin of 19.8%, both high compared to its gross profit margin.
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. VMW has a low capitalization ratio of 8%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Currently trading at $135.15 per share, Salesforce.com (NYSE:CRM) has fallen 5.1%. So far today, the company's volume is 1.1 million shares. This is greater than yesterday's volume of 1.1 million shares. 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. 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. CRM has a high gross profit margin of 90.7%. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. CRM has negative operating and net profit margins. This is because the company reported a net loss and net operating loss in the most recent quarter.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual 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. CRM has a P/B ratio of 10.31 which 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. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Investment Valuation Ratios: Price/Book Value Ratio
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
by
Investopedia Staff
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