The market is having a good day so far: the Nasdaq is up 1.9%; the S&P 500 has moved up 1.8%; and the Dow has climbed 1.7%. The technology sector is a category of stocks relating to the research, development and/or distribution of technologically based goods and services. This sector contains businesses revolving around the manufacturing of electronics, creation of software, computers or products and services relating to information technology. The technology sector offers a wide arrange of products and services for both customers and other businesses. Consumer goods like personal computers, stereos and televisions are continually improved and upgraded, offering the latest technology to all users. Businesses receive information and services from software and database systems, which allow the companies to make strategic business decisions.
The Technology sector (XLK) is up 1.8%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Tangoe (Nasdaq:TNGO)||$634.8 million||-21.5%|
|VeriFone Systems (NYSE:PAY)||$3.81 billion||-11.1%|
|Nam Tai Electronics (NYSE:NTE)||$503.6 million||-5.7%|
|Power One (Nasdaq:PWER)||$795.9 million||-4.5%|
|Citrix (Nasdaq:CTXS)||$14.51 billion||+4.2%|
|SXC Health Solutions Corp (Nasdaq:CTRX)||$8.94 billion||+4%|
|VMware (NYSE:VMW)||$37.99 billion||+3.6%|
Broker Summary: E-Trade Financial
Tangoe (Nasdaq:TNGO) is currently trading at $13.35 per share, after a steep drop of 21.5%. The company is trading at a volume of 3.9 million shares. This is greater than yesterday's volume of 1.3 million shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. TNGO has a fairly low capitalization ratio of 0.2%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Shares of VeriFone Systems (NYSE:PAY) are currently trading at $31.45, a steep decline of 11.1%. At 8.5 million shares, the company's volume so far today is 3.3 times its current daily average. As a stock moves up or down, it is important to pay attention to the trading volume. This indicates the level of interest: the higher the volume, the more the interest. 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. PAY's debt ratio of 66.5% is fairly high. As such, the company is highly leveraged and not highly liquid. 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.
Nam Tai Electronics (NYSE:NTE) is down 5.7% to reach $10.60 per share. The company's volume for the day so far is 1.7 million shares. Volume is an important indicator because it indicates how significant a price shift is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. NTE's P/B ratio of 1.45 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. 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: Using The Price-To-Book Ratio To Evaluate Companies
Power One (Nasdaq:PWER) has decreased to $6.22 per share, a 4.5% fall. The company's volume for the day so far is 10.2 million shares, 5.7 times its current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. PWER's P/S ratio of 0.52 is fairly low. A company with a lower P/S ratio is generally considered more attractive, since investors are 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.
Citrix (Nasdaq:CTXS) has moved up 4.2% and is currently trading at $80.85 per share. So far today, the company's volume is 1.2 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. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). CTXS has a P/E ratio of 40.6, high compared to the industry average of 4.45. 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
SXC Health Solutions Corp (Nasdaq:CTRX) has risen 4% to hit a current price of $90.79 per share. At 333,156 shares, the company's volume so far today is in keeping with its current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. PEG ratio for CTRX is consistent with the industry average at 1.98. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
VMware (NYSE:VMW) is up 3.6% to reach a current price of $92.31 per share. So far today, 853,967 shares have changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. 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. VMW has a P/B ratio of 7.4 which 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
The Bottom Line The nature of the market is such that stocks will have good days and bad days. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.