The morning has been bad for the market. The Nasdaq has declined 0.4%; the S&P 500 has fallen 0.8%; and the Dow has slipped 0.8%. The transportation sector is a category of stocks relating to the transportation of goods or customers. It is made up of airlines, railroads and trucking companies. The performance of the transportation sector is sensitive to the price of oil. Because operations revolve around the use of vehicles, fuel prices represent a significant cost to transportation companies. As the price of oil rises, transportation companies will be expected to earn less. Inversely, these companies do well when the cost of fuel decreases.
The Transportation sector (IYT) is currently lagging behind the overall market, down 0.7%, and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|Hornbeck Offshore Services, Inc. (NYSE:HOS)||$1.47 billion||-11.9%|
|Macquarie Infrastructure Company LLC (NYSE:MIC)||$1.63 billion||+10.7%|
|Old Dominion Freight Line (Nasdaq:ODFL)||$2.25 billion||+9.9%|
|Golar LNG Partners LP (Nasdaq:GMLP)||$737.3 million||-5.1%|
|Allegiant Travel Company (Nasdaq:ALGT)||$1.28 billion||+4.4%|
|Diana Shipping Inc. (NYSE:DSX)||$541.9 million||+3.5%|
|Genesee & Wyoming Inc. (NYSE:GWR)||$3.35 billion||+3.2%|
Broker Summary: E-Trade Financial
Hornbeck Offshore Services (NYSE:HOS) is currently trading at $36.68 per share, after a steep drop of 11.9%. So far today, the company's volume is 939,107 shares, 2.2 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. HOS' capitalization ratio is 44%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Macquarie Infrastructure (NYSE:MIC) is trading at $38.80 per share, a significant rise of 10.7%. The company is trading at a volume of 347,575 shares. This is more trading activity than there was yesterday. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. MIC's P/B ratio of 2.52 shows that its share price is higher than its book value. 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
Increasing 9.9%, Old Dominion Freight (Nasdaq:ODFL) is trading at $43.04 per share. At 429,707 shares, the company's volume so far today is one times the current three-month average. 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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. ODFL is in line with the industry average with a P/E ratio of 15.1. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Understanding The P/E Ratio
After a decline of 5.1%, Golar LNG (Nasdaq:GMLP) has hit a share price of $30.25. So far today, the company's volume is 162,247 shares. The trading volume for a stock indicates the level of investor interest. 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. 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 GMLP is 1.99. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After rising 4.4%, Allegiant Travel (Nasdaq:ALGT) is currently trading at a share price of $69.40. So far today, the company's volume is 111,841 shares, 0.8 times its current daily average. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. ALGT's P/S ratio of 1.26 is on the high side. 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.
Diana Shipping (NYSE:DSX) is currently trading at $6.76 per share, a 3.5% increase. So far today, the company's volume is 140,061 shares. This is on pace to reach yesterday's trading volume of 276,407 shares. If a stock price moves on high volume, this means that the change is a significant one. 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 debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. The debt ratio for DSX is a low 26.5%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Genesee & Wyoming (NYSE:GWR) has moved up 3.2% and is currently trading at $62.61 per share. With 244,868 shares changing hands so far today, the company's volume is consistent with its average over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. GWR has a D/E ratio of 64%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
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. 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.