It's been a bad day for the market after the morning's trading. The Nasdaq is trading down 0.2%; the S&P 500 has slipped 0.3%; and the Dow has decreased 0.4%.
The Consumer/Non-Cyclical sector (XLP) is currently ahead of the overall market, down only 0.1%, and its biggest movers are currently:
|Company||Market Cap||Percentage Change|
|Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR)||$3.59 billion||-6%|
|Owens Corning (NYSE: OC)||$3.59 billion||-4.4%|
|Blyth, Inc. (NYSE: BTH)||$613.4 million||+3.5%|
|Cott Corporation (USA) (NYSE: COT)||$745.4 million||+2.7%|
|Tejon Ranch Company (NYSE: TRC)||$545 million||-2.6%|
|Universal Corp (NYSE: UVV)||$1.06 billion||+2.2%|
|United Natural Foods, Inc. (Nasdaq: UNFI)||$2.53 billion||-2.1%|
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Green Mountain Coffee Roasters (Nasdaq: GMCR) has fallen 6% and is currently trading at $21.74 per share. With 6.5 million shares changing hands so far today, the company's volume is 1.4 times its current three-month average. The trading volume for a stock indicates the level of investor interest.
Margin analysis is a great way to understand the profitability of companies. GMCR has a gross profit margin of 37.9%. 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. GMCR's operating profit margin of 16.9% is low relative to its gross profit margin. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. Net margin is 9.5%.
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. A price/sales ratio is derived by dividing stock market price by company sales. GMCR's P/S ratio of 2.09 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.
Falling 4.4%, Owens (NYSE: OC) is currently at a share price of $28.18. This morning, the company's volume is 1.2 million shares. This is 0.4 times the current daily average. Volume is an important indicator because it indicates how significant a price shift is.
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. OC has a low gross profit margin of 24.6%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. 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. OC has an operating profit margin of -0.9%. This means that the company came in with a net operating loss in the most recent quarter. Net profit margin compares net income with sales. Relative to its gross profit margin, the company has a low net profit margin of 3.8%. A low profit margin may indicate a pricing strategy.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for OC is 53%. 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.
After an increase of 3.5%, Blyth (NYSE: BTH) has reached a current price of $73.70. The company's volume is currently 35,189 shares for the day, while it was 54,837 shares yesterday. 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.
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. The gross profit margin for BTH is 64.2%. Operating margin for BTH is 6.9% and net margin is 1.3%, both high relative to its gross margin.
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. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. The D/E ratio for BTH 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.
Increasing 2.7%, Cott Corporation (NYSE: COT) is trading at $8.04 per share. The company is currently trading a volume of 363,129 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is.
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. COT has a low gross profit margin of 15.9%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Compared with its gross profit margin, COT's operating profit margin of 4% and net profit margin of 1.6% are low.
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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. COT's capitalization ratio of 51.4% is relatively high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
After a decline of 2.6%, Tejon Ranch (NYSE: TRC) has hit a share price of $26.53. So far today, the company's volume is 8,615 shares, 0.1 times the average volume over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting.
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 TRC is 48.6%. Operating margin is determined by taking operating income (income minus variable expenses) and dividing it by sales. Operating profit margin for TRC is 0.3%. 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. The company has a net profit margin of 14.9%.
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. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. TRC's P/B ratio of 2.03 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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: Investment Valuation Ratios: Price/Book Value Ratio
Universal (NYSE: UVV) has risen 2.2% to hit a current price of $46.43 per share. The company's volume for the day so far is 114,367 shares. This is 0.6 times its average daily volume. If a stock price moves on high volume, this means that the change is a significant one.
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 price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). UVV has a P/E ratio of 14.0, high compared to the industry average of 10.7. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. 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: Investment Valuation Ratios: Price/Earnings Ratio
United Natural Foods (Nasdaq: UNFI) is down 2.1% to reach $50.62 per share. At 75,765 shares, the company's volume so far today is below yesterday's volume of 337,987 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 is a great way to understand the profitability of companies. UNFI has a low gross profit margin of 18.6%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. UNFI has an operating profit margin of 3.5% and a net profit margin of 1.7%, both low compared to its gross profit margin.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. PEG ratio for UNFI is consistent with the industry average at 1.94. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
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.