The market is currently down, with the Nasdaq falling 0.2%, the S&P 500 declining 0.3% and the Dow slipping 0.4%. The healthcare sector is the category of stocks relating to medical and healthcare goods or services. This sector includes hospital management firms, health maintenance organizations (HMOs), biotechnology and a variety of medical products. Stocks in the healthcare sector are often considered to be defensive because the products and services are essential. Even during economic downturns, people will still require medical aid and medicine to overcome illness. Having a consistent demand for goods and services makes this sector less sensitive to business cycle fluctuations.The Healthcare sector (XLV) is down 0.1%, outperforming the market overall. Currently, the biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Centene Corp (NYSE: CNC)||$1.83 billion||-25.3%|
|WellCare Health Plans, Inc. (NYSE: WCG)||$2.46 billion||-6.9%|
|AMERIGROUP Corporation (NYSE: AGP)||$3.03 billion||-6.2%|
|Community Health Systems (NYSE: CYH)||$2.04 billion||+5.5%|
|LifePoint Hospitals, Inc. (Nasdaq: LPNT)||$1.83 billion||+4%|
|Taro Pharmaceutical Industries Ltd. (NYSE: TARO)||$1.69 billion||+3.4%|
|Pharmacyclics, Inc. (Nasdaq: PCYC)||$2.73 billion||+3.4%|
Broker Summary: TD Ameritrade Thinkorswim
Centene (NYSE: CNC) is currently trading at $26.48 per share, after a steep drop of 25.3%. So far today, 7.3 million shares have changed hands. Volume is used to evaluate how meaningful the price movement of a stock is.
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 debt ratio shows the proportion of assets that a company is financing through debt. CNC's debt ratio is 57.1%. 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.
Currently trading at $53.12 per share, WellCare Health Plans (NYSE: WCG) has fallen 6.9%. At 1.2 million shares, the company's volume so far today is 1.5 times its average over the past 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.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PEG ratio for WCG is consistent with the industry average at 0.56. 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.
AMERIGROUP (NYSE: AGP) is down 6.2% to reach $58.64 per share. This morning, the company's volume is 1.6 million shares. This is two times its average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. AGP's P/B ratio of 2.13 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. P/B value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies.
SEE: How Buybacks Warps The Price-To-Book Ratio
Community Health (NYSE: CYH) is at $23.41 per share after an increase of 5.5%. The company's volume is currently 923,691 shares for the day, lighter than yesterday's volume of 1.5 million shares. Volume is an important indicator because it indicates how significant a price shift is.
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. CYH's gross profit margin is 64.8%. Compared with its gross profit margin, CYH's operating profit margin of 10.6% and net profit margin of 2.2% are high.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. The P/S ratio for CYH is 0.15, which is relatively low. Low P/S ratios are more attractive than high ratios because this indicates that an investor is paying less for each dollar of sales. 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.
LifePoint Hospitals (Nasdaq: LPNT) has risen 4% to hit a current price of $39.05 per share. The company's volume for the day so far is 132,670 shares. High volume indicates a lot of investor interest while low volume indicates the opposite.
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. LPNT has a gross profit margin of 38.8%. 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. Operating profit margin for LPNT is 10.7%. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. Net profit margin for the company is 5.9%.
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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. LPNT's P/E ratio of 10.8 is under the industry average of 13.2. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks.
SEE: Profit With The Power Of Price-To-Earnings
Taro Pharmaceutical (NYSE: TARO) has increased to a share price of $39.20, a 3.4% rise. The company's volume is currently 41,270 shares for the day, 0.6 times the current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator.
Margin analysis is a great way to understand the profitability of companies. TARO's gross profit margin is 70.7%. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. TARO's operating profit margin is 45.6%. Net profit margins are those generated from all phases of a business, including taxes. The company has a net profit margin of 37.7%.
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 debt-equity (D/E) ratio is a leverage ratio. TARO has a debt-equity ratio of 6%, which is on the low side. A low D/E ratio may be a sign that the company is not taking advantage of leverage to increase its profits. 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.
Pharmacyclics (Nasdaq: PCYC) is currently trading at $40.84 per share, a 3.4% increase. So far this morning, 830,337 shares have changed hands. This is 0.7 times the average daily volume. The trading volume for a stock indicates the level of investor interest.
Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. PCYC's operating profit margin is -932.1%. This is because the company reported a net operating loss in the most recent quarter.
In making a decision about a potential or existing investment, valuation ratios are useful as a basis for seeing whether the stock price is too high, reasonable, or a bargain. The debt ratio is calculated by dividing total liabilities by total assets. PCYC's debt ratio of 38.1% is on the low side. This indicates that the company engages in conservative financing with opportunities to borrow in the future at no significant risk. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
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. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.