So far today, the Nasdaq has fallen 0.8%, the S&P 500 has slipped 0.2% and the Dow is up 0.4%.
These are the biggest movers in the Services sector (IYC) (+0.4%):
|Company||Market Cap||Percentage Change|
|Netflix (Nasdaq:NFLX)||$4.46 billion||-24.1%|
|Lumber Liquidators Holdings Inc (NYSE:LL)||$897 million||+20.5%|
|Tripadvisor Inc (Nasdaq:TRIP)||$5.83 billion||-17.3%|
|International Game Technology (NYSE:IGT)||$4.34 billion||-15%|
|Level three Communications, Inc. (NYSE:LVLT)||$4.42 billion||-12.9%|
|Buffalo Wild Wings (Nasdaq:BWLD)||$1.46 billion||-11.5%|
|Lithia Motors Inc (NYSE:LAD)||$645 million||+9.2%|
Broker Summary: OptionsXpress Online Trading Platform
Netflix (Nasdaq:NFLX) is currently trading at $61.04 per share, after a steep drop of 24.1%. So far today, the company's volume is 13.4 million shares, 2.9 times its current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. The D/E ratio for NFLX is 60%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Lumber Liquidators Holdings (NYSE:LL) rose a significant 20.5% to reach $39.25 per share. So far today, the company's volume is 2.5 million shares. This is more trading activity than there was yesterday. 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. 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. Compared to the industry average of 14.02, LL's P/E ratio of 33.4 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
Shares of Tripadvisor (Nasdaq:TRIP) are currently trading at $35.96, a steep decline of 17.3%. So far today, the company's volume is 5.3 million shares, 2.7 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. PEG ratio for TRIP is consistent with the industry average at 2.23. 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.
Taking a 15% hit, International Game Technology (NYSE:IGT) is currently trading at $12.48 per share. This morning, the company is trading a volume of 12.1 million shares. A stock's volume conveys how excited investors are about it. 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 calculated by dividing the current stock price by the company's book value per share. IGT's stock is trading for more than its book value with a P/B ratio of 2.44. 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Level three Communications (NYSE:LVLT) is currently trading at $17.78 per share, after a steep drop of 12.9%. The company's volume is currently 3.2 million shares for the day, 2.7 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. The P/S ratio for LVLT is 1.11, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.
Buffalo Wild (Nasdaq:BWLD) is at a share price of $69.85 after a sharp decline of 11.5%. The company's volume is currently 2.8 million shares. This is greater than yesterday's volume of 1.6 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. 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. BWLD's debt ratio of 32.2% is on the low side. 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.
Lithia Motors (NYSE:LAD) is up 9.2% to reach a current price of $27.06 per share. With 563,257 shares changing hands so far today, the company's volume is 2.2 times 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 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. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. LAD has a capitalization ratio of 40.8%. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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.