The market is having a good day so far: the Nasdaq has risen 2.2%; the S&P 500 is up 2%; and the Dow has moved up 1.8%. The energy sector is the category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms. Performance in the sector is largely driven by the supply and demand for worldwide energy. Energy producers will do very well during times of high oil and gas prices, but will earn less when the value of energy drops. Furthermore, this sector is sensitive to political events, which historically have driven changes in the price of oil.
The Energy sector (XLE) is up 2.3%, outperforming the market overall. The biggest movers in the sector so far are:
|Company||Market Cap||Percentage Change|
|EOG Resources (NYSE:EOG)||$25.91 billion||+10.5%|
|Approach Resources Inc. (Nasdaq:AREX)||$897.5 million||-8.4%|
|Eni S.p.A. (ADR) (NYSE:E)||$72.8 billion||+8.4%|
|Sunoco Logistics Partners L.P. (NYSE:SXL)||$4.15 billion||+6.8%|
|Southwestern Energy (NYSE:SWN)||$11.22 billion||-5.1%|
|Continental Resources, Inc. (NYSE:CLR)||$11.34 billion||+4.7%|
|Eagle Rock Energy Partners, L.P. (Nasdaq:EROC)||$1.29 billion||-4.3%|
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EOG (NYSE:EOG) is currently at $106.18 per share after a dramatic increase of 10.5%. At 2.8 million shares, the company's volume so far today is above yesterday's volume of 2.5 million shares. Volume is an important indicator because it indicates how significant a price shift is. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). Relative to the industry P/E ratio of 35.68, EOG's 21.1 is low. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. 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
Approach Resources (Nasdaq:AREX) is down 8.4% to reach $24.52 per share. This morning, the company is trading a volume of 840,206 shares. A stock's volume conveys how excited investors are about it. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. AREX's PEG ratio is 5.45. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Eni S.p.A (NYSE:E) is up 8.4% to reach a current price of $43.57 per share. With 1.1 million shares changing hands so far today, the company's volume is 1.6 times the average volume over the last three months. Volume is used to evaluate how meaningful the price movement of a stock is. 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, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. E's P/B ratio of 1.02 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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: Using The Price-To-Book Ratio To Evaluate Companies
Sunoco Logistics Partners (NYSE:SXL) is at $42.85 per share after an increase of 6.8%. This morning, the company's volume is 216,130 shares. This is 1.3 times its average daily volume. 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 can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. Dividend yield measures the income that a stock will generate for an investor. Dividend yield for SXL is 4.3%. A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. SEE: Due Diligence On Dividends
Currently trading at $30.48 per share, Southwestern Energy (NYSE:SWN) has fallen 5.1%. So far today, the company's volume is 6.9 million shares,. High volume indicates a lot of investor interest while low volume indicates the opposite. 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 price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. SWN has a high P/S ratio of 3.64. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
Increasing 4.7%, Continental Resources (NYSE:CLR) is trading at $65.54 per share. So far today, the company's volume is 565,301 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for CLR is 63.6%, which is relatively high. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. 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.
Eagle Rock Energy Partners (Nasdaq:EROC) is trading at $9.15 per share, down 4.3%. So far today, the company's volume is 211,902 shares, 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the 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. EROC has a D/E ratio of 86%. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Daily stock performance should be weighed against historical performance and put in context of the market overall. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.