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Tickers in this Article: SHAW, CBI, AWI, LECO, LNN, TDY, SPW
The morning has been bad for the market. The Nasdaq has fallen 0.2%; the S&P 500 has slipped 0.2%; and the Dow has declined 0.3%. The capital goods sector is the category of stocks related to the manufacture or distribution of goods. The sector is diverse, containing companies that manufacture machinery used to create capital goods, electrical equipment, aerospace and defense, engineering and construction projects. It is also referred to as the "industrials sector". Performance in the capital goods sector is sensitive to fluctuations in the business cycle. Because it relies heavily on manufacturing, the sector does well when the economy is booming or expanding. As economic conditions worsen, the demand for capital goods drops off, usually lowering the prices of stocks in the sector.

The Capital Goods sector (XLI) is currently lagging behind the overall market, down 0.4%, and its current biggest movers are:
CompanyMarket CapPercentage Change
The Shaw Group Inc. (NYSE:SHAW)$1.76 billion+52.7%
Chicago Bridge & Iron Company N.V. (NYSE:CBI)$3.94 billion-15.1%
Armstrong World Industries, Inc. (NYSE:AWI)$2.65 billion-13.5%
Lincoln Electric Holdings, Inc. (Nasdaq:LECO)$3.72 billion-8.6%
Lindsay Corporation (NYSE:LNN)$931.2 million-4.2%
Teledyne Technologies Incorporated (NYSE:TDY)$2.34 billion-3.6%
SPX Corporation (NYSE:SPW)$3.23 billion-3.1%
Software Summary: Finviz.com Stock Screener

Shaw Group (NYSE:SHAW) is currently at $40.76 per share after a dramatic increase of 52.7%. The company's volume for the day so far is 27.4 million shares. This is 37.3 times the current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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 price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. SHAW's PEG ratio is 35.93. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Chicago Bridge & Iron Company (NYSE:CBI) is currently trading at $34.57 per share, after a steep drop of 15.1%. So far today, the company's volume is 11 million shares, which is more trading activity than there was yesterday. If a stock price moves on high volume, this means that the change is a significant one. 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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. The P/E ratio for CBI is 14.7, above the industry average of 5.92. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Understanding The P/E Ratio

Taking a 13.5% hit, Armstrong World Industries (NYSE:AWI) is currently trading at $39.05 per share. The company's volume for the day so far is 944,929 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. AWI's P/S ratio of 1.01 is on the high side. 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.

Falling 8.6%, Lincoln Electric Holdings (Nasdaq:LECO) is currently at a share price of $40.64. With 519,427 shares changing hands so far today, the company's volume is 1.7 times its current three-month average. 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 a 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. 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. The debt ratio for LECO is a low 38.2%. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Lindsay (NYSE:LNN) is currently trading at a share price of $70.15, a 4.2% decline. This morning, the company's volume is 112,955 shares. This is 0.6 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. 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 compares the total liabilities for a company to its total shareholder equity. LNN has a low debt-equity ratio of 2%. 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.

Teledyne Technologies (NYSE:TDY) has fallen 3.6% and is currently trading at $61.30 per share. At 69,621 shares, the company's volume so far today is on pace to finish the day below yesterday's volume of 259,095 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. The capitalizion ratio of 22.6% is on the low end. Low leverage is a significant balance sheet strength, a sign of a less risky investment. 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.

At $61.83, SPX (NYSE:SPW) has slipped 3.1%. The company is currently trading a volume of 202,746 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. SPW's stock is trading for more than its book value with a P/B ratio of 1.37. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. 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: Investment Valuation Ratios: Price/Book Value Ratio

The Bottom Line The nature of the market is such that stocks will have good days and bad days. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.

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