The market is on the rise this morning. The Nasdaq has risen 1.1%; the S&P 500 has increased 1.3%; and the Dow has risen 1.4%. 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.
Outperforming the market overall, the Financial sector (XLF) is up 1.3% and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|Cash America International, Inc. (NYSE:CSH)||$1.33 billion||-16.5%|
|Ameriprise Financial (NYSE:AMP)||$10.49 billion||+5.8%|
|Signature Bank (Nasdaq:SBNY)||$2.84 billion||+3.3%|
|Visa (NYSE:V)||$99.47 billion||+3%|
|Raymond James Financial, Inc. (NYSE:RJF)||$4.54 billion||-2.9%|
|Torchmark (NYSE:TMK)||$4.8 billion||-2.9%|
|MasterCard (NYSE:MA)||$49.99 billion||+2.4%|
Forex Broker Summary: UFXMarkets
Cash America International (NYSE:CSH) is at a share price of $37.66 after a sharp decline of 16.5%. The company's volume is currently 1.6 million shares for the day, 5.2 times its current daily 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 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, 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. CSH's P/B ratio of 1.16 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. 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: How Buybacks Warps The Price-To-Book Ratio
Ameriprise (NYSE:AMP) has increased to a share price of $50.75, a 5.8% rise. The company is currently trading a volume of one million 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 provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt-equity (D/E) ratio is a leverage ratio. The debt-equity ratio of 32% is relatively low. This shows that the company's assets are financed primarily through equity. 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.
After an increase of 3.3%, Signature (Nasdaq:SBNY) has reached a current price of $63.25. With 138,775 shares changing hands so far today, the company's volume is consistent with its current three-month average. Volume is used to evaluate how meaningful the price movement of a stock is. While investment valuation ratios are useful tools in estimating the attractiveness of an investment, remember that it is important to look at a company's historical performance and compare the company ratios with its competitors and industry overall. 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. SBNY has a low capitalization ratio of 17.2%. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. 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.
Visa (NYSE:V) is at $125.92 per share after an increase of 3%. The company's volume for the day so far is 2.8 million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. The P/E ratio for V is 28.7, above the industry average of 17.24. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Profit With The Power Of Price-To-Earnings
Raymond James Financial (NYSE:RJF) is trading at $31.98 per share, down 2.9%. The company's volume is currently 789,891 shares for the day, 1.4 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. RJF has a PEG ratio of 1.4, 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.
Torchmark (NYSE:TMK) has decreased to $48.92 per share, a 2.9% fall. This morning, the company is trading a volume of 729,272 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt ratio shows the proportion of assets that a company is financing through debt. TMK has a high debt ratio of 77.1%. 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.
MasterCard (NYSE:MA) has moved up 2.4% and is currently trading at $422.25 per share. The company's volume for the day so far is 358,127 shares, consistent with its average over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. MA's dividend yield of 0.3% is fairly low. This could indicate that that the stock is overpriced or that future dividends might be higher. 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: Investment Valuation Ratios: Dividend Yield
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.