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BorgWarner and More Big Movers in Consumer Cyclical on October 1, 2012
The Nasdaq is up 0.7%, the S&P 500 has climbed 1% and the Dow has risen 1.1%, marking a bad morning for the market. The consumer cyclical sector is a category of stocks that relies heavily on the business cycle and economic conditions. Consumer cyclicals include industries such as automotive, housing, entertainment and retail. The category can be further divided into durable and non-durable sections. Durable cyclicals include physical goods such as hardware or vehicles, while non-durables represent items like movies or hotel services. The performance of consumer cyclicals is highly related to the state of the economy. They represent goods and services that are not considered necessities, but luxurious purchases. During contractions or recessions, people have less disposable income to spend on consumer cyclicals. When the economy is expanding or booming, the sales of these goods rise as retail and leisure spending increase.
The Consumer Cyclical sector (XLY) is up 0.7%, underperforming the market overall. The biggest movers in the sector are currently:
Broker Summary: TD Ameritrade Thinkorswim
Ceradyne (Nasdaq:CRDN) is trading at $34.92 per share, a significant rise of 42.9%. The company's volume for the day so far is 11.3 million shares. Yesterday, volume was only 83,180 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. CRDN's P/B ratio of 1.19 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Rising 7.8%, TRW Automotive (NYSE:TRW) is currently trading at $47.10 per share. So far today, the company's volume is 1.6 million shares, 1.9 times its current daily average. 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 provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. The P/S ratio for TRW is 0.27, which is relatively low. The lower the P/S ratio, the more reasonably price the stock, all else being equal. 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.
Increasing 4.2%, Tenneco (NYSE:TEN) is trading at $29.18 per share. This morning, the company is trading a volume of 145,165 shares. A stock's volume conveys how excited investors are about it. 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. TEN has a high debt ratio of 97.4%. 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. 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.
BorgWarner (NYSE:BWA) is up 3.7% to reach a current price of $71.66 per share. At 555,610 shares, the company's volume so far today is consistent with its average over the last three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). BWA's P/E ratio of 15.6 is above the industry average of 3.36. 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. 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: Investment Valuation Ratios: Price/Earnings Ratio
Currently trading at $30.17 per share, Shutterfly (Nasdaq:SFLY) has fallen 3.1%. So far today, the company's volume is 167,669 shares. This is a sign that there will be less trading activity than there was yesterday. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). SFLY has a PEG ratio of 7.99. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After an increase of 3%, Autoliv (NYSE:ALV) has reached a current price of $63.85. So far today, the company's volume is 377,586 shares, 0.8 times the average daily volume. 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. 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. ALV's stock is trading for more than its book value with a P/B ratio of 1.71. 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: Using The Price-To-Book Ratio To Evaluate Companies
Lear (NYSE:LEA) has risen 3% to hit a current price of $38.92 per share. So far today, the company's volume is 304,548 shares. Volume indicates the level of interest that investors have in a company at its current price. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. The dividend yield for LEA is 1.5%, which is on the low end. This may indicate that the company's stock is overpriced. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Due Diligence On Dividends
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
The Consumer Cyclical sector (XLY) is up 0.7%, underperforming the market overall. The biggest movers in the sector are currently:
| Company | Market Cap | Percentage Change |
| Ceradyne (Nasdaq:CRDN) | $591.2 million | +42.9% |
| TRW Automotive (NYSE:TRW) | $5.33 billion | +7.8% |
| Tenneco (NYSE:TEN) | $1.68 billion | +4.2% |
| BorgWarner (NYSE:BWA) | $7.91 billion | +3.7% |
| Shutterfly (Nasdaq:SFLY) | $1.12 billion | -3.1% |
| Autoliv (NYSE:ALV) | $5.91 billion | +3% |
| Lear (NYSE:LEA) | $3.7 billion | +3% |
Ceradyne (Nasdaq:CRDN) is trading at $34.92 per share, a significant rise of 42.9%. The company's volume for the day so far is 11.3 million shares. Yesterday, volume was only 83,180 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. CRDN's P/B ratio of 1.19 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Rising 7.8%, TRW Automotive (NYSE:TRW) is currently trading at $47.10 per share. So far today, the company's volume is 1.6 million shares, 1.9 times its current daily average. 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 provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. The P/S ratio for TRW is 0.27, which is relatively low. The lower the P/S ratio, the more reasonably price the stock, all else being equal. 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.
Increasing 4.2%, Tenneco (NYSE:TEN) is trading at $29.18 per share. This morning, the company is trading a volume of 145,165 shares. A stock's volume conveys how excited investors are about it. 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. TEN has a high debt ratio of 97.4%. 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. 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.
BorgWarner (NYSE:BWA) is up 3.7% to reach a current price of $71.66 per share. At 555,610 shares, the company's volume so far today is consistent with its average over the last three months. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). BWA's P/E ratio of 15.6 is above the industry average of 3.36. 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. 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: Investment Valuation Ratios: Price/Earnings Ratio
Currently trading at $30.17 per share, Shutterfly (Nasdaq:SFLY) has fallen 3.1%. So far today, the company's volume is 167,669 shares. This is a sign that there will be less trading activity than there was yesterday. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). SFLY has a PEG ratio of 7.99. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After an increase of 3%, Autoliv (NYSE:ALV) has reached a current price of $63.85. So far today, the company's volume is 377,586 shares, 0.8 times the average daily volume. 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. 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. ALV's stock is trading for more than its book value with a P/B ratio of 1.71. 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: Using The Price-To-Book Ratio To Evaluate Companies
Lear (NYSE:LEA) has risen 3% to hit a current price of $38.92 per share. So far today, the company's volume is 304,548 shares. Volume indicates the level of interest that investors have in a company at its current price. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. The dividend yield for LEA is 1.5%, which is on the low end. This may indicate that the company's stock is overpriced. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Due Diligence On Dividends
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
by
Investopedia Staff
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