The market is having a bad day so far: the Nasdaq is trading down 0.3%; the S&P 500 has declined 0.4%; and the Dow has slipped 0.5%. The Nasdaq Composite Index is a capitalization-weighted index, with each company weighted in proportion to its market value.
The biggest movers traded on the NASDAQ so far are:
|Company||Market Cap||Percentage Change|
|Schnitzer Steel Industries, Inc. (Nasdaq:SCHN)||$869 million||-9.5%|
|Focus Media Holding Limited (ADR) (Nasdaq:FMCN)||$3.02 billion||+9.1%|
|Veeco Instruments Inc. (Nasdaq:VECO)||$1.48 billion||-6.4%|
|SXC Health Solutions Corp. (USA) (Nasdaq:CTRX)||$9.28 billion||-5.2%|
|Core-Mark Holding Company, Inc. (Nasdaq:CORE)||$544.6 million||-4.8%|
|Syntel, Inc. (Nasdaq:SYNT)||$2.51 billion||-4.3%|
|Mellanox Technologies, Ltd. (Nasdaq:MLNX)||$4.66 billion||-3.8%|
Schnitzer Steel Industries (Nasdaq:SCHN) has fallen 9.5% and is currently trading at $29.33 per share. So far today, the company's volume is 370,676 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. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. The debt-equity ratio of 33% is relatively low. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Rising 9.1%, Focus Media Holding Limited (Nasdaq:FMCN) is currently trading at $25.51 per share. So far today, the company's volume is 9.4 million shares, 4.6 times its average over the past three months. The trading volume for a stock indicates the level of investor interest. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. FMCN has a PEG ratio of 0.36. 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.
Slipping 6.4%, Veeco Instruments (Nasdaq:VECO) is currently trading at $35.34 per share. So far today, 515,470 shares of the company's stock have changed hands. This is more trading activity than there was yesterday. Volume is used to evaluate how meaningful the price movement of a stock is. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. VECO has a P/B ratio of 1.74 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. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies
SXC Health Solutions Corp (Nasdaq:CTRX) is trading at $85.95 per share, down 5.2%. So far today, the company's volume is 396,413 shares, in keeping with its current daily average. If a stock price moves on high volume, this means that the change is a significant one. Valuation ratios allow the investor to make a quick determination as to a company's investment value. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. The P/E ratio for CTRX is 55.5, above the industry average of 21.99. 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. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: The P/E Ratio: A Good Market-Timing Indicator
Falling 4.8%, Core-Mark Holding Company (Nasdaq:CORE) is currently at a share price of $45.14. The company's volume for the day so far is 15,276 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. CORE's capitalization ratio is 11.1%, which is relatively low. 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.
Currently trading at $57.37 per share, Syntel (Nasdaq:SYNT) has fallen 4.3%. At 103,207 shares, the company's volume so far today is 1.3 times its current three-month average. 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. 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 assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. SYNT has a PEG ratio of 1.02, 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.
Mellanox (Nasdaq:MLNX) is down 3.8% to reach $107.82 per share. So far today, the company's volume is 450,008 shares. 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. 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. 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. The P/B ratio for MLNX is 8.65, indicating that the stock is trading for more 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. 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 No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.