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Tickers in this Article: INFI, MDCO, VOLC, ONXX, BRLI, GHDX, TMO
The market has been doing well after the morning's trading. The Nasdaq has climbed 0.2%; the S&P 500 has increased 0.5%; and the Dow is trading up 0.5%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.

Outperforming the market overall, the Healthcare sector (XLV) is up 0.3% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Infinity Pharmaceuticals (Nasdaq:INFI)$1.01 billion+6.1%
Medicines (Nasdaq:MDCO)$1.43 billion-5.2%
Volcano (Nasdaq:VOLC)$1.5 billion+4.8%
Onyx Pharmaceuticals (Nasdaq:ONXX)$5.59 billion+4.5%
Bio-Reference Laboratories (Nasdaq:BRLI)$898 million-2.3%
Genomic Health (Nasdaq:GHDX)$1.12 billion-2%
Thermo Fisher (NYSE:TMO)$22.04 billion+2%
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Increasing 6.1%, Infinity Pharmaceuticals (Nasdaq:INFI) is trading at $27.18 per share. So far today, the company's volume is 157,229 shares, in keeping with its current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. INFI's debt ratio of 103% is fairly high. This means that most of the company's assets are financed through debt. 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.

Medicines (Nasdaq:MDCO) is down 5.2% to reach $25.25 per share. The company's volume for the day so far is 848,547 shares. This is greater than yesterday's volume of 512,716 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. 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-equity (D/E) ratio is a leverage ratio. MDCO has a debt-equity ratio of 42%, which is on the low side. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

After an increase of 4.8%, Volcano (Nasdaq:VOLC) has reached a current price of $29.45. At 187,985 shares, the company's volume so far today is in keeping with 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. 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 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. VOLC has a fairly low capitalization ratio of 21.5%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.

Onyx Pharmaceuticals (Nasdaq:ONXX) is currently trading at $89.77 per share, a 4.5% increase. The company's volume for the day so far is 780,314 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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 ONXX is -33.28. 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.

Slipping 2.3%, Bio-Reference Laboratories (Nasdaq:BRLI) is currently trading at $31.69 per share. So far today, the company's volume is 162,470 shares, consistent with its current daily 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. 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. 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. BRLI's stock is trading for more than its book value with a P/B ratio of 4.09. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio

Genomic Health (Nasdaq:GHDX) is trading at $36.06 per share, down 2%. The company's volume is currently 43,117 shares. This is on pace to fall short of yesterday's volume of 171,833 shares. A stock's volume conveys how excited investors are about it. 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. P/E ratio for GHDX is 136.3. 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: Investment Valuation Ratios: Price/Earnings Ratio

Rising 2%, Thermo Fisher (NYSE:TMO) is currently trading at $61.49 per share. With 748,443 shares changing hands so far today, the company's volume is consistent with its current three-month average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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 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. The P/S ratio for TMO is a high 1.54. 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.

The Bottom Line The nature of the market is such that stocks will have good days and bad days. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. 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.

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