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Tickers in this Article: TAM, CSX, GMLP, SSW, WERN, ALGT, PAC
The Nasdaq has risen 0.5%, the S&P 500 has climbed 0.3% and the Dow has moved up 0.5% on a good day for the market so far. 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 down 1.3% on a good day for the market overall. The biggest movers in the sector so far are:
CompanyMarket CapPercentage Change
TAM S.A. (ADR) (NYSE:TAM)$3.79 billion+4.2%
CSX (NYSE:CSX)$22.97 billion-3%
Golar LNG Partners LP (Nasdaq:GMLP)$682.3 million-2.9%
Seaspan Corporation (NYSE:SSW)$1.07 billion+2.8%
Werner Enterprises, Inc. (Nasdaq:WERN)$1.77 billion-2.7%
Allegiant Travel Company (Nasdaq:ALGT)$1.34 billion+2.3%
Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC)$2.02 billion+2%
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TAM S.A (NYSE:TAM) has risen 4.2% and is currently trading at $25.30 per share. So far today, 117,148 shares have changed hands. Volume indicates the level of interest that investors have in a company at its current price. 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. TAM's gross profit margin is 51.3%. The operating and net profit margins for TAM are both negative. This is because the company reported a net loss and net operating loss in the most recent quarter.

Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. TAM's P/B ratio of 3.32 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 value comparisons should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Currently trading at $21.43 per share, CSX (NYSE:CSX) has fallen 3%. At 3.6 million shares, the company's volume so far today is 0.4 times its current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. CSX has a gross profit margin of 63.6%. 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. CSX has an operating profit margin of 28.9%. Net profit margin is a good ratio for determining how a company is performing. The company has a net profit margin of 15.8%.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). CSX's P/E ratio of 12.8 falls below the industry average of 15.74. 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Investment Valuation Ratios: Price/Earnings Ratio

Golar LNG (Nasdaq:GMLP) is trading at $28.64 per share, down 2.9%. The company's volume for the day so far is 16,034 shares. Trading activity is down from yesterday when 46,608 shares changed hands. Volume is used to evaluate how meaningful the price movement of a stock is. 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. GMLP has a relatively high gross profit margin of 83.4%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. The operating profit margin indicates how much EBIT is generated per dollar of sales. GMLP has an operating profit margin of 62.6%, which is low relative to its gross profit margin. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. The company's net profit margin is 36.9%.

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. The dividend yield is calculated by dividing a company's dividends per share by its stock price. Dividend yield for GMLP is 5.8%. For income-oriented investors such as retirees, a stock with a high dividend yield may be more attractive than a stock with a low dividend yield. SEE: Due Diligence On Dividends

Seaspan (NYSE:SSW) has risen 2.8% to hit a current price of $17.52 per share. The company's volume for the day so far is 84,823 share, 0.6 times its current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin analysis is a great way to understand the profitability of companies. SSW's gross profit margin of 80.2% is fairly high. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Net profit margins are those generated from all phases of a business, including taxes. The company has a net profit margin of -13.9%. This shows that the company reported a net loss in the most recent quarter. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. SSW's operating profit margin is 48.9%.

Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The debt ratio shows the proportion of assets that a company is financing through debt. SSW has a debt ratio of 79.4%, which is on the high side. 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. 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 a decline of 2.7%, Werner Enterprises (Nasdaq:WERN) has hit a share price of $23.67. So far today, the company's volume is 150,280 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The gross profit margin for WERN is 51.4%. 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. WERN has an operating profit margin of 6.6%. 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. Net margin is 5.3%.

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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. WERN's debt-equity ratio of 1% is on the low end. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Allegiant Travel (Nasdaq:ALGT) is at $71.28 per share after an increase of 2.3%. The company's volume is currently 37,447 shares for the day, 0.2 times the current daily average. The trading volume for a stock indicates the level of investor interest. 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. ALGT's gross profit margin is 38%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. With an operating profit margin of 15.3%, ALGT has a low one relative to its gross profit margin. Net profit margin compares net income with sales. The company has a net profit margin of 6.5%.

It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for ALGT is a high 1.26. 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.

After an increase of 2%, Grupo Aeroportuario del Pacifico (NYSE:PAC) has reached a current price of $36.72. So far today, the company's volume is 8,420 shares. This is below yesterday's volume of 31,866 shares. Volume is an important indicator because it indicates how significant a price shift is. 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. PAC has a 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. 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. Operating profit margin for PAC is 0%. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. The company's net profit margin is 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. PEG ratio for PAC is 12.67. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

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.

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