The market is on the rise this morning. The Nasdaq is trading up 1.2%; the S&P 500 has increased 0.6%; and the Dow has climbed 0.7%. 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 up 0.6%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Air Methods Corporation (Nasdaq:AIRM)||$1.27 billion||+7.9%|
|Expeditors Intl (Nasdaq:EXPD)||$7.93 billion||+3.1%|
|Delta Air Lines (NYSE:DAL)||$9.18 billion||-2.7%|
|Atlas Air Worldwide Holdings, Inc. (Nasdaq:AAWW)||$1.19 billion||+2.7%|
|Kirby Corporation (NYSE:KEX)||$2.61 billion||+2.6%|
|China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA)||$3.95 billion||-2.6%|
|US Airways Group (NYSE:LCC)||$2.28 billion||-2.4%|
Beginner's Guide To Stockcharts.com
Air (Nasdaq:AIRM) has increased to a share price of $106.78, a 7.9% rise. The company's volume for the day so far is 496,657 shares. This is five times the average daily volume. Volume is used to evaluate how meaningful the price movement of a stock is. Margin ratios highlight companies that are worth further examination. AIRM's gross profit margin is 40%. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. AIRM's operating profit margin is 13.1%. Net profit margins are those generated from all phases of a business, including taxes. Net margin is 7.4%.
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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. AIRM has a P/E ratio of 23.5, high compared to the industry average of 21.67. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Can Investors Trust the P/E Ratio?
So far today, 487,266 shares have changed hands, which is less activity than yesterday's volume of 1.5 million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. The gross profit margin for EXPD is 27.5%. Compared with its gross profit margin, EXPD's operating profit margin of 8.9% and net profit margin of 6.1% are low.
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. 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. EXPD's PEG ratio of 2.0 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.
Delta (NYSE:DAL) is currently trading at a share price of $10.51, a 2.7% decline. The company is currently trading a volume of 5.3 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. 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. DAL's gross profit margin is 41.1%. 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. DAL has an operating profit margin of 9.2%. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. Net profit margin for the company is 3.6%.
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. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for DAL is 0.24, which is relatively low. Low P/S ratios are more attractive than high ratios because this indicates that an investor is paying less for each dollar of sales. 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.
Rising 2.7%, Atlas Air Worldwide Holdings (Nasdaq:AAWW) is currently trading at $46.38 per share. So far today, the company's volume is 41,259 shares, 0.3 times the current three-month average. A stock's volume conveys how excited investors are about it. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for AAWW is 44.2%. 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. AAWW's operating profit margin is 14.9%. 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 6.7%.
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. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for AAWW is 52.3%. 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.
After an increase of 2.6%, Kirby (NYSE:KEX) has reached a current price of $47.88. The company's volume for the morning is 197,110 shares. This is 0.5 times its average daily volume. 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. KEX has a gross profit margin of 32.6%. KEX's operating margin of 15.7% and net margin of 9.5% are low relative to its gross margin.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. KEX's P/E ratio of 13.1 is above the industry average of 5.71. 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. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Profit With The Power Of Price-To-Earnings
After a decline of 2.6%, China Eastern Airlines Corp. Ltd (NYSE:CEA) has hit a share price of $17.04. This morning, 17,198 shares have been traded, below yesterday's volume of 43,389 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. 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. The gross profit margin for CEA is 59.7%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. 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 margin is calculated by dividing net income by sales. The company has a net profit margin of 4.3%, high compared to its gross profit margin. 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.
Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CEA has a capitalization ratio of 54.4%, which is on the high end. A company considered too highly leveraged (too much debt) may find its freedom of action restricted by its creditors and/or have its profitability hurt by high interest costs. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.
Falling 2.4%, US Airways (NYSE:LCC) is currently at a share price of $13.73. This morning, the company is trading a volume of 3.3 million shares. 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. Margin ratios highlight companies that are worth further examination. LCC has a gross profit margin of 48.9%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. Operating profit margin for LCC is 2%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. Net margin is 1.8%.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. LCC's stock is trading for more than its book value with a P/B ratio of 11.16. 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. 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
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.