The Nasdaq is trading down 1.3%, the S&P 500 has declined 0.8% and the Dow has slipped 0.5% on a bad morning for the market. 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 ahead of the overall market, down only 1%, and its biggest movers are currently:
|Company||Market Cap||Percentage Change|
|United Continental Holdings Inc (NYSE:UAL)||$8.23 billion||-4.6%|
|Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC)||$2.19 billion||-3.4%|
|Copa Holdings, S.A. (NYSE:CPA)||$3.39 billion||-2.4%|
|Hornbeck Offshore Services, Inc. (NYSE:HOS)||$1.39 billion||-2.2%|
|China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA)||$3.48 billion||+1.7%|
|Westinghouse Air Brake Technologies Corp (NYSE:WAB)||$3.58 billion||-1.5%|
|J.B. Hunt Transport Services, Inc. (Nasdaq:JBHT)||$6.85 billion||-1.5%|
Forex Broker Summary: Forex Capital Markets (FXCM)
United Continental Holdings (NYSE:UAL) is down 4.6% to reach $23.66 per share. The company's volume is currently 2.2 million shares for the day, 0.6 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin analysis is a great way to understand the profitability of companies. UAL's gross profit margin is 34.4%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. UAL has an operating profit margin of 0.7%. Net profit margin examines how effectively a company is managed and how profitable it is by looking at how much of each dollar in revenues ultimately hits the company's bottom line. The company's net profit margin is 1.6%.
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. UAL has a capitalization ratio of 88.2%, which is on the high end. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
At $37.73, Grupo Aeroportuario del Pacifico (NYSE:PAC) has slipped 3.4%. The company is currently trading a volume of 8,102 shares. The trading volume for a stock indicates the level of investor interest. 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. PAC has a relatively high gross profit margin of 80.1%. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. Operating profit margin for PAC is 0%. 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 has a net profit margin of 30.1%.
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. 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. PAC has a dividend yield of 5.6%. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Investment Valuation Ratios: Dividend Yield
Falling 2.4%, Copa Holdings (NYSE:CPA) is currently at a share price of $74.75. With 225,932 shares changing hands so far today, the company's volume is 0.7 times its current three-month average. 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. 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. CPA's gross profit margin is 47.8%. The operating profit margin is a rough measure of the operating leverage a company can achieve in the conduct of the operational part of its business. CPA's operating profit margin is 20.5%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. Net profit margin for the company is 14.3%.
Valuation ratios like 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 are useful in determining how attractive a potential or existing investment is. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. CPA's PEG ratio of 0.83 is in line with the industry average. 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.
Currently trading at $38.61 per share, Hornbeck Offshore Services (NYSE:HOS) has fallen 2.2%. The company is trading at a volume of 67,257 shares. This is below yesterday's volume of 392,951 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. The gross profit margin for HOS is 50.5%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. Operating profit margin for HOS is 23.9%. Net profit margin compares net income with sales. Net margin is 3%.
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. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. HOS has a P/B ratio of 1.26 which 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. 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
China Eastern Airlines Corp. Ltd (NYSE:CEA) is up 1.7% to reach a current price of $15.72 per share. So far today, the company's volume is 3,765 shares, 0.2 times the current daily average. A stock's volume conveys how excited investors are about it. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. CEA's gross profit margin is 59.7%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. CEA has an operating profit margin of -1%. This shows that the company reported a net operating loss in the most recent quarter. Net profit margins are those generated from all phases of a business, including taxes. Relative to its gross profit margin, the company has a high net profit margin of 4.3%. A company with a high profit margin has a greater capability to maintain strong earnings during a recession than does a company with a low profit margin, providing investors with a greater margin of safety.
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/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). The P/E ratio for CEA is 6.0, below the industry average of 8.41. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: The P/E Ratio: A Good Market-Timing Indicator
After a decline of 1.5%, Westinghouse Air Brake (NYSE:WAB) has hit a share price of $73.14. The company's volume for the day so far is 71,622 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for WAB is 28.9%. Operating margin for WAB is 16.1% and net margin is 9%, both low relative to its gross margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for WAB is a high 1.73. This could be a good sign if the share price increases. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
J.B. Hunt Transport Services (Nasdaq:JBHT) has decreased to $57.60 per share, a 1.5% fall. The company's volume for the day so far is 527,673 share, 0.8 times its average over the past three months. Volume is used to evaluate how meaningful the price movement of a stock is. 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. JBHT's gross profit margin is 39%. 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. JBHT's operating profit margin is 10%. Net profit margin is a good ratio for determining how a company is performing. The company's net profit margin is 5.9%.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt ratio is calculated by dividing total liabilities by total assets. JBHT has a high debt ratio of 72.9%. 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.