The Nasdaq has climbed 0.8%, the S&P 500 has increased 0.8% and the Dow is trading up 0.9%, marking a bad morning for the market. 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.
The Financial sector (XLF) is up 0.7%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Deutsche (NYSE:DB)||$30.44 billion||+5.3%|
|Canadian Imperial Bank of Commerce (NYSE:CM)||$30.79 billion||+2%|
|Humana (NYSE:HUM)||$11.15 billion||+1.7%|
|Westpac Banking Corporation (NYSE:WBK)||$76.84 billion||+1.6%|
|Epoch (Nasdaq:EPHC)||$509.2 million||-1.6%|
|Blackstone Group (NYSE:BX)||$7.13 billion||-1.5%|
|Goldman Sachs (NYSE:GS)||$50.2 billion||+1.4%|
Broker Summary: TD Ameritrade Thinkorswim
Deutsche (NYSE:DB) has increased to a share price of $35.65, a 5.3% rise. The company's volume is currently 1.5 million shares for the day, 0.9 times the 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. 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-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. DB has a D/E ratio of 401%, which is relatively high. This shows that the company's assets are financed primarily through debt. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
Canadian Imperial Bank of Commerce (NYSE:CM) has risen 2% to hit a current price of $77.42 per share. So far today, the company's volume is 119,547 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. CM has a PEG ratio of 1.01, 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.
Humana (NYSE:HUM) has increased to a share price of $70.14, a 1.7% rise. So far today, 487,067 shares have changed hands, lighter than yesterday's volume of 1.8 million shares. A stock's volume conveys how excited investors are about it. 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/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. HUM has a P/B ratio of 1.34 which shows that its share price is higher than its book value. 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Westpac Banking Corporation (NYSE:WBK) has moved up 1.6% and is currently trading at $128.84 per share. So far today, 9,356 shares have changed hands. This is 0.4 times the current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. Dividend yield for WBK is 6.6%. It is important to remember that dividends are only one component of a stock's return and capital appreciation (or decline) must also be considered when evaluating a security. SEE: Guide To Stock-Picking Strategies: Income Investing
After a decline of 1.6%, Epoch (Nasdaq:EPHC) has hit a share price of $21.29. The company's volume is currently 4,978 shares for the day, 0.1 times the 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 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. 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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. EPHC's P/E ratio of 23.3 is above the industry average of 16.7. 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: The P/E Ratio: A Good Market-Timing Indicator
Slipping 1.5%, Blackstone Group (NYSE:BX) is currently trading at $13.54 per share. This morning, the company is trading a volume of 611,967 shares. 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 debt ratio shows the proportion of assets that a company is financing through debt. BX has a high debt ratio of 74.6%. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Goldman Sachs (NYSE:GS) is at $106.17 per share after an increase of 1.4%. This morning, 1.3 million shares have been traded, consistent with the volume from yesterday on pace to finish the day below yesterday's volume of 2.8 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. GS has a high P/S ratio of 1.39. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.