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Tickers in this Article: IHS, WLT, IOC, DNR, LUFK, TOT, NGL
This morning's trading has marked a bad day for the market so far. The Nasdaq has slipped 0.3%; the S&P 500 has decreased 0.3%; and the Dow is trading down 0.1%. 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 currently ahead of the overall market, down only 0.2%, and its biggest movers are currently:
CompanyMarket CapPercentage Change
IHS (NYSE:IHS)$7.63 billion-17.1%
Walter Energy (NYSE:WLT)$2.33 billion-5%
InterOil Corporation (NYSE:IOC)$4.12 billion-3.6%
Denbury (NYSE:DNR)$6.59 billion+3%
Lufkin Industries (Nasdaq:LUFK)$2.02 billion-2.6%
TOTAL S.A (NYSE:TOT)$121 billion-2.2%
NGL Energy (NYSE:NGL)$1.27 billion+2%
Broker Summary: Charles Schwab Online Brokerage

Taking a 17.1% hit, IHS (NYSE:IHS) is currently trading at $95.52 per share. The company's volume for the day so far is 1.4 million shares. This is more trading activity than there was yesterday. Volume is used to evaluate how meaningful the price movement of a stock is. 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 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. The capitalization ratio for IHS is 31.3%. 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.

Walter Energy (NYSE:WLT) has fallen 5% and is currently trading at $35.68 per share. So far today, the company's volume is 1.2 million shares, 0.3 times the average volume over the last 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 a 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). WLT's P/E ratio of 10.1 is above the industry average of 1.69. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio

After a decline of 3.6%, InterOil Corporation (NYSE:IOC) has hit a share price of $83.64. So far today, the company's volume is 353,932 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt-equity (D/E) ratio is a leverage ratio. The debt-equity ratio of 15% is relatively low. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. 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.

Denbury (NYSE:DNR) has risen 3% to hit a current price of $17.22 per share. At 6.9 million shares, the company's volume so far today is one times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. 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. DNR's P/B ratio of 1.31 shows that its share price is higher 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. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: How Buybacks Warps The Price-To-Book Ratio

Currently trading at $57.11 per share, Lufkin Industries (Nasdaq:LUFK) has fallen 2.6%. So far today, the company's volume is 105,417 shares. This is on pace to fall short of yesterday's volume of 483,075 shares. If a stock price moves on high volume, this means that the change is a significant one. 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 is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. The dividend yield for LUFK is 0.8%, which is on the low end. A company with a low dividend yield may be a safer investment in the long run. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Due Diligence On Dividends

At $52.04, TOTAL S.A (NYSE:TOT) has slipped 2.2%. The company's volume for the day so far is 1.7 million shares, 0.6 times 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. A price/sales ratio is derived by dividing stock market price by company sales. TOT has a P/S ratio of 0.45, on the low end. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

Increasing 2%, NGL Energy (NYSE:NGL) is trading at $25 per share. This morning, the company is trading a volume of 3,925 shares. The trading volume for a stock indicates the level of investor interest. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt ratio is calculated by dividing total liabilities by total assets. The debt ratio for NGL is 57.8%. 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.

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. 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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