The market has been slipping so far today. The Nasdaq has decreased 0.2%; the S&P 500 is down 0.3%; and the Dow has declined 0.2%. The financial sector is the category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate. Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.
On a bad day for the market overall, the Financial sector (XLF) has shown little change and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|Coventry Health Care (NYSE:CVH)||$4.68 billion||+18.5%|
|Investors Bancorp (Nasdaq:ISBC)||$1.81 billion||+4.5%|
|Aetna (NYSE:AET)||$12.71 billion||+3.5%|
|Texas Capital Bancshares (Nasdaq:TCBI)||$1.69 billion||+2.9%|
|Greenhill & Co (NYSE:GHL)||$1.18 billion||+2.5%|
|Prosperity Bancshares (NYSE:PB)||$2.32 billion||+2.5%|
|Westpac Banking Corporation (NYSE:WBK)||$77.45 billion||+2%|
Forex Broker Summary: UFXMarkets
Coventry Health Care (NYSE:CVH) has soared 18.5% to reach a current price of $41.42 per share. The company is currently trading a volume of 22.5 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/sales ratio measures a company's stock market price by its revenues. CVH has a P/S ratio of 0.32, on the low end. Low P/S ratios can indicate unrecognized value potential - so long as other criteria like high profit margins, low debt levels and growth prospects are in place. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Increasing 4.5%, Investors Bancorp (Nasdaq:ISBC) is trading at $16.85 per share. So far today, 382,265 shares have changed hands, more than yesterday's 79,420 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 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 price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. ISBC has a P/B ratio of 1.84 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. 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: Investment Valuation Ratios: Price/Book Value Ratio
Aetna (NYSE:AET) is at $39.39 per share after an increase of 3.5%. This morning, the company's volume is 8.6 million shares. This is three times its current daily 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 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. 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 debt-equity (D/E) ratio is a leverage ratio. AET's D/E ratio of 124% is on the high side. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
After an increase of 2.9%, Texas Capital Bancshares (Nasdaq:TCBI) has reached a current price of $45.70. So far today, the company's volume is 260,287 shares, 0.9 times its average over the past three months. The trading volume for a stock indicates the level of investor interest. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. TCBI has a capitalization ratio of 67.2%, which is on the high end. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.
Greenhill & Co (NYSE:GHL) has increased to a share price of $42.20, a 2.5% rise. So far today, the company's volume is 103,353 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. GHL's P/E ratio of 29.3 is under the industry average of 40.81. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
Prosperity Bancshares (NYSE:PB) is currently trading at $42.48 per share, a 2.5% increase. At 167,472 shares, the company's volume so far today is. Volume is used to evaluate how meaningful the price movement of a stock is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. PB has a PEG ratio of 1.49, which is consistent 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.
Westpac Banking Corporation (NYSE:WBK) has moved up 2% and is currently trading at $130.36 per share. The company's volume for the day so far is 15,659 shares. This is consistent with its current daily average. Volume is an important indicator because it indicates how significant a price shift 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. The debt ratio shows the proportion of assets that a company is financing through debt. WBK's debt ratio of 93.4% is fairly high. This means that most of the company's assets are financed through debt. 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.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.