The market is having a bad day so far. The Nasdaq has fallen 0.2%; the S&P 500 has decreased 0.3%; and the Dow has declined 0.4%.The Real Estate Operations sector (IYR) is currently lagging behind the overall market, down 0.6%, and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|Zillow Inc (Nasdaq:Z)||$975.9 million||-4.8%|
|SL Green Realty Corp (NYSE: SLG)||$6.83 billion||-2%|
|Macerich Co (NYSE: MAC)||$7.59 billion||-1.9%|
|Boston Properties (NYSE: BXP)||$15.76 billion||-1.6%|
|Jones Lang LaSalle Incorporated (NYSE: JLL)||$3.09 billion||-1.4%|
|PS Business Parks Inc (NYSE: PSB)||$1.64 billion||-1.2%|
|Starwood Property Trust, Inc. (NYSE: STWD)||$2.38 billion||+1.2%|
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Zillow (Nasdaq:Z) has decreased to $32.25 per share, a 4.8% fall. So far today, the company's volume is 272,584 shares, which is less activity than yesterday's volume of 468,353 shares. 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.
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. Z's gross profit margin of 94.9% is on the high side. This may indicate that the company is over-pricing its products and/or services. Operating margin for Z is 7.4% and net margin is 4.7%, both high relative to its gross margin.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. Z has a P/B ratio of 8.65 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio.
SEE: Using The Price-To-Book Ratio To Evaluate Companies
At $74.11, SL Green (NYSE: SLG) has slipped 2%. So far today, the company's volume is 218,072 shares. 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 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. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. SLG has a dividend yield of 1.3%, which is fairly low. If you are an income investor, this stock may not be attractive to you. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor.
SEE: Investment Valuation Ratios: Dividend Yield
After a decline of 1.9%, Macerich (NYSE: MAC) has hit a share price of $56.20. So far today, the company's volume is 308,991 shares, 0.3 times its average over the past three months. 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 price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for MAC is 6.51, which is relatively high. This could be a good sign if the share price increases. 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.
Boston Properties (NYSE: BXP) has fallen 1.6% and is currently trading at $103.50 per share. The company's volume for the morning is 405,896 shares. This is 0.5 times its current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. Compared to the industry average of 13.83, BXP's P/E ratio of 52.6 is quite high. This could mean that the market is expecting big things over the next few months or years. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock.
SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
Currently trading at $69.67 per share, Jones Lang LaSalle (NYSE: JLL) has fallen 1.4%. At 41,437 shares, the company's volume so far today is lighter than yesterday's volume of 202,131 shares. Volume indicates the level of interest that investors have in a company at its current price.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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 debt-equity ratio of 38% 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.
PS Business Parks (NYSE: PSB) is down 1.2% to reach $66.84 per share. The company is currently trading a volume of 18,576 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 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.
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. PSB's capitalization ratio is 37.8%. 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.
Rising 1.2%, Starwood Property Trust (NYSE: STWD) is currently trading at $20.71 per share. With 205,483 shares changing hands so far today, the company's volume is 0.3 times the average volume over the last three months. 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.
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. STWD has a debt ratio of 29.7%, which is fairly low. 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.
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. 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.