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Tickers in this Article: MLNX, SWKS, CRUS, AVGO, EZCH, UTEK, BRCM
The market is having a good day so far: the Nasdaq has moved up 1.1%; the S&P 500 has risen 0.3%; and the Dow has increased 0.3%.

Underperforming the market overall, the Semiconductors sector (XLK) is up 0.9%, and these are its current biggest movers:
CompanyMarket CapPercentage Change
Mellanox Technologies, Ltd. (Nasdaq:MLNX)$2.64 billion+41.5%
Skyworks Solutions Inc (Nasdaq:SWKS)$5.05 billion+8.8%
Cirrus Logic, Inc. (Nasdaq:CRUS)$1.71 billion+7.4%
Avago Technologies Ltd (Nasdaq:AVGO)$8.27 billion+6.5%
EZchip Semiconductor Ltd. (Nasdaq:EZCH)$935.7 million+5%
Ultratech, Inc. (Nasdaq:UTEK)$806.4 million+5%
Broadcom (Nasdaq:BRCM)$16.89 billion+4.5%
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Mellanox (Nasdaq:MLNX) has soared 41.5% to reach a current price of $93.92 per share. At 3.7 million shares, the company's volume so far today is whereas yesterday, volume was only 2.1 million shares. Volume is an important indicator because it indicates how significant a price shift is. 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. MLNX's gross profit margin is 72.6%. Compared with its gross profit margin, MLNX's operating profit margin of 14.9% and net profit margin of 8.2% are high.

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 especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. MLNX's P/B ratio of 8.1 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. 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

Rising 8.8%, Skyworks Solutions (Nasdaq:SWKS) is currently trading at $28.99 per share. The company's volume for the day so far is 8.8 million shares. The trading volume for a stock indicates the level of investor interest. Margin ratios highlight companies that are worth further examination. SWKS has a gross profit margin of 47.7%. 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. SWKS has an operating profit margin of 12%. Net profit margins are those generated from all phases of a business, including taxes. Net margin is 13.6%.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for SWKS is 3.46, which is relatively high. This could be a good sign if the share price increases. 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.

Cirrus Logic (Nasdaq:CRUS) has moved up 7.4% and is currently trading at $28.56 per share. The company's volume for the day so far is 2.2 million share, in keeping with the average volume over the past three months. Volume is used to evaluate how meaningful the price movement of a stock is. 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 is calculated by dividing total liabilities by total assets. CRUS' debt ratio of 14.4% is on the low side. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After rising 6.5%, Avago (Nasdaq:AVGO) is currently trading at a share price of $35.98. This morning, the company's volume is 1.6 million shares. This is 0.9 times its current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. AVGO's gross profit margin is 54.2%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. Operating profit margin for AVGO is 23.7%. Net profit margin is a good ratio for determining how a company is performing. The company has a net profit margin of 23.5%.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. Compared to the industry average of 5.59, AVGO's P/E ratio of 14.7 is quite high. 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. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: The P/E Ratio: A Good Market-Timing Indicator

EZchip (Nasdaq:EZCH) is currently trading at $35.09 per share, a 5% increase. The company's volume is currently 167,368 shares for the day, below yesterday's volume of 302,595 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. EZCH has a gross profit margin of 65.4%. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. EZCH's operating profit margin is 31.5%. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. The company's net profit margin is 17.9%.

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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). EZCH's PEG ratio is 3.5. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Ultratech (Nasdaq:UTEK) is up 5% to reach a current price of $32.31 per share. The company is currently trading a volume of 291,355 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 is a great way to understand the profitability of companies. UTEK's gross profit margin is 55.9%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). UTEK has an operating profit margin of 22.7%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. Net profit margin for the company is 19.4%.

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/book value ratio is one of the more common methods of determining whether a stock is fairly valued. The P/B ratio for UTEK is 2.76, 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. 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

Broadcom (Nasdaq:BRCM) is at $32.04 per share after an increase of 4.5%. With 7.2 million shares changing hands so far today, the company's volume is 0.9 times its average 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. Margin ratios highlight companies that are worth further examination. The gross profit margin for BRCM is 53.2%. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. BRCM's operating profit margin of 2.7% is high relative to its gross profit margin. A business that has a higher operating margin than others in the industry is generally doing better as long as the gains didn't come by piling on debt or taking highly risky speculations with shareholders' money. Net profit margin is calculated by dividing net income by sales. The company has a net profit margin of 10.6%.

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. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for BRCM is 1.3%, which is on the low end. This may indicate that the company's stock is overpriced. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor. SEE: Investment Valuation Ratios: Dividend Yield

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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