The Nasdaq has been relatively flat, the S&P 500 has risen 0.4% and the Dow has climbed 0.5% so far today. 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 biggest movers in the Energy sector (XLE) (+0.5%) are:
|Company||Market Cap||Percentage Change|
|Walter Energy (NYSE:WLT)||$1.96 billion||+4.4%|
|Consol (NYSE:CNX)||$6.76 billion||+4.3%|
|Tesoro (NYSE:TSO)||$5.95 billion||+3.5%|
|Peabody Energy (NYSE:BTU)||$5.85 billion||+3.2%|
|Valero (NYSE:VLO)||$17.43 billion||+3.1%|
|Atwood Oceanics (NYSE:ATW)||$2.86 billion||+3%|
|Martin Midstream Partners (Nasdaq:MMLP)||$832.2 million||-2.7%|
Forex Broker Summary: Forex Capital Markets (FXCM)
Walter Energy (NYSE:WLT) has risen 4.4% and is currently trading at $32.70 per share. At 1.7 million shares, the company's volume so far today is 0.8 times the current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. WLT has a PEG ratio of 1.0, which is consistent with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Consol (NYSE:CNX) is currently trading at $31 per share, a 4.3% increase. The company's volume for the day so far is 1.5 million shares. This is about the same trading activity as there was yesterday. If a stock price moves on high volume, this means that the change is a significant one. 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 most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). CNX's P/E ratio of 11.1 is above the industry average of 0.52. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: The P/E Ratio: A Good Market-Timing Indicator
Tesoro (NYSE:TSO) has moved up 3.5% and is currently trading at $44.02 per share. With 2.2 million shares changing hands so far today, the company's volume is 0.8 times the average volume over the last three months. 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. 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. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. TSO has a fairly low capitalization ratio of 24.7%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
After rising 3.2%, Peabody Energy (NYSE:BTU) is currently trading at a share price of $22.51. So far today, 3.3 million shares have changed hands. 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/book value ratio is calculated by dividing the current stock price by the company's book value per share. BTU's stock is trading for more than its book value with a P/B ratio of 1.04. 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
Valero (NYSE:VLO) has risen 3.1% to hit a current price of $32.58 per share. So far today, the company's volume is 2.7 million shares, in keeping with its current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. 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. 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 VLO is 1.9%, which is on the low end. This may indicate that the company's stock is overpriced. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Guide To Stock-Picking Strategies: Income Investing
Rising 3%, Atwood Oceanics (NYSE:ATW) is currently trading at $45.07 per share. The company's volume is currently 209,701 shares. This is on pace to fall short of yesterday's volume of 584,175 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. 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. 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 ATW is 3.47, which is relatively high. 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.
Martin Midstream Partners (Nasdaq:MMLP) is trading at $35.04 per share, down 2.7%. So far today, the company's volume is 35,734 shares, consistent with its average over the last three months. A stock's volume conveys how excited investors are about it. 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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. MMLP has a debt ratio of 63.1%, which is on the high side. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.