Currently, the Nasdaq has fallen 0.5%, the S&P 500 remains relatively unchanged and the Dow has slipped 0.2%.
The Services sector (IYC) has fallen 0.5% despite little change in the market overall. The biggest movers in the sector so far are:
|Company||Market Cap||Percentage Change|
|Guess?, Inc. (NYSE:GES)||$2.59 billion||-7.4%|
|Healthcare Services Group, Inc. (Nasdaq:HCSG)||$1.32 billion||+5.6%|
|Zumiez Inc. (Nasdaq:ZUMZ)||$1.17 billion||-5%|
|Abercrombie & Fitch Co. (NYSE:ANF)||$2.71 billion||+5%|
|Netflix (Nasdaq:NFLX)||$4.45 billion||+3.9%|
|Tractor Supply Company (Nasdaq:TSCO)||$6.02 billion||-3.8%|
|Lululemon Athletica inc. (Nasdaq:LULU)||$6.18 billion||-3.6%|
Broker Summary: Charles Schwab Online Brokerage
After a decline of 7.4%, Guess (NYSE:GES) has hit a share price of $26.68. So far today, the company's volume is 1.5 million shares. This is in keeping with its current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. GES has a gross profit margin of 46%. All else being equal, investors should feel more confident investing in a company with a high operating margin than one with a low operating margin. Operating profit margin for GES is 6.8%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company's net profit margin is 9.3%.
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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). GES' P/E ratio of 10.8 falls below the industry average of 15.0. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. 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
Healthcare Services Group (Nasdaq:HCSG) has risen 5.6% and is currently trading at $20.73 per share. At 470,838 shares, the company's volume so far today is 1.3 times its current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. HCSG has a low gross profit margin of 14.1%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Compared with its gross profit margin, HCSG's operating profit margin of 4.7% and net profit margin of 4.1% are low.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). HCSG's PEG ratio is 1.89. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Zumiez (Nasdaq:ZUMZ) is trading at $35.39 per share, down 5%. The company's volume for the day so far is 196,299 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. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. The gross profit margin for ZUMZ is 39.8%. Investors trying to assess a company's ability to continue to pay its fixed expenses even if its business declines may want to evaluate the operating margin ratio. ZUMZ's operating profit margin is 5.6%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company has a net profit margin of 6.9%.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. ZUMZ's P/B ratio of 3.95 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. 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: How Buybacks Warps The Price-To-Book Ratio
Abercrombie & Fitch (NYSE:ANF) is up 5% to reach a current price of $34.40 per share. The company's volume is currently 3.3 million shares for the day, whereas yesterday, volume was only 2.6 million shares. A stock's volume conveys how excited investors are about it. Margin analysis is a great way to understand the profitability of companies. ANF has a gross profit margin of 64.4%. Operating margin for ANF is 0.7% and net margin is 2.5%, both high relative to its gross margin.
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. ANF has a dividend yield of 2.1%. 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: Dividend Yield For The Downturn
After an increase of 3.9%, Netflix (Nasdaq:NFLX) has reached a current price of $83.36. The company is currently trading a volume of 3.1 million shares. This is 0.6 times the average volume over the last three months. Volume is an important indicator because it indicates how significant a price shift is. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. The gross profit margin for NFLX is 66.1%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. NFLX has a negative operating margin of -0.2%. This means that the company came in with a net operating loss in the most recent quarter. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. Net margin is 4.8%, which is high relative to its gross profit margin. Companies with high net profit margins have a bigger cushion to protect themselves during the hard times.
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 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. The D/E ratio for NFLX is 60%. 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.
Tractor Supply (Nasdaq:TSCO) is currently trading at a share price of $80.42, a 3.8% decline. The company's volume is currently 355,656 shares for the day, 0.4 times the current daily average. Volume indicates the level of interest that investors have in a company at its current price. Margin ratios highlight companies that are worth further examination. TSCO has a gross profit margin of 33.2%. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. TSCO has an operating profit margin of 6.3%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. Net profit margin for the company is 5.5%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt ratio is calculated by dividing total liabilities by total assets. TSCO has a low debt ratio of 39.5%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. 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.
Lululemon Athletica (Nasdaq:LULU) is down 3.6% to reach $55.86 per share. This morning, the company is trading a volume of 1.2 million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. LULU's gross profit margin is 59.2%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). Operating profit margin for LULU is 25.6%. Net profit margins are those generated from all phases of a business, including taxes. Net margin is 17.9%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. LULU's P/S ratio of 9.7 is on the high side. This could be a good sign if the share price increases. 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. 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.