The market has been slipping so far today. The Nasdaq has fallen 0.3%; the S&P 500 has fallen 0.4%; and the Dow has declined 0.5%.
The Services sector (IYC) is currently lagging behind the overall market, down 0.5%, and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|Focus Media Holding Limited (ADR) (Nasdaq:FMCN)||$3.02 billion||+9.1%|
|Core-Mark Holding Company, Inc. (Nasdaq:CORE)||$544.6 million||-4.8%|
|New Oriental Education & Tech Grp (ADR) (NYSE:EDU)||$2.04 billion||+4.4%|
|Ctrip.com International, Ltd. (ADR) (Nasdaq:CTRP)||$1.94 billion||+4.3%|
|51job, Inc. (ADR) (Nasdaq:JOBS)||$1.26 billion||-4.1%|
|Sears Holdings (Nasdaq:SHLD)||$5.47 billion||+3.7%|
|Sysco (NYSE:SYY)||$16.89 billion||+3.3%|
Rising 9.1%, Focus Media Holding Limited (Nasdaq:FMCN) is currently trading at $25.51 per share. The company's volume is currently 9.4 million shares for the day, 4.6 times the average daily volume. The trading volume for a stock indicates the level of investor interest. 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. 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. FMCN has a fairly low capitalization ratio of 6.2%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. 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.
At $45.14, Core-Mark Holding Company (Nasdaq:CORE) has slipped 4.8%. So far today, 15,276 shares of the company's stock have changed hands. At this rate, trading activity will likely be down from yesterday when 50,758 shares changed hands. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. CORE's P/E ratio of 19.1 is above the industry average of 14.73. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
New Oriental Education & Tech Grp (NYSE:EDU) has moved up 4.4% and is currently trading at $13.47 per share. With four million shares changing hands so far today, the company's volume is 1.2 times its average over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. EDU has a PEG ratio of 0.57. 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.
After rising 4.3%, Ctrip.com International, Ltd (Nasdaq:CTRP) is currently trading at a share price of $14.13. The company is currently trading a volume of 1.5 million 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 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. 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. The P/B ratio for CTRP is 1.86, indicating that the stock is trading for more 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. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: Investment Valuation Ratios: Price/Book Value Ratio
51job, Inc (Nasdaq:JOBS) is trading at $42.03 per share, down 4.1%. At 80,373 shares, the company's volume so far today is 0.7 times the current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. JOBS has a high P/S ratio of 7.58. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
Sears (Nasdaq:SHLD) has risen 3.7% and is currently trading at $53.30 per share. The company's volume is currently 918,432 shares. This is greater than yesterday's volume of 397,278 shares. If a stock price makes a big move up or down, volume lets us know the significance of that 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. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. SHLD has a debt ratio of 79.1%, which is on the high side. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Sysco (NYSE:SYY) has risen 3.3% to hit a current price of $29.79 per share. So far today, the company's volume is 4.8 million shares, 1.4 times the current three-month average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. SYY's capitalization ratio is 33.1%. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
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. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.