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Capital Goods Sector's Biggest Movers for July 18, 2012
The market is doing well so far today. The Nasdaq is up 1.2%; the S&P 500 is trading up 0.6%; and the Dow has climbed 0.7%. 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.
Outperforming the market overall, the Capital Goods sector (XLI) is up 1.6% and its biggest movers so far today are:
Broker Summary: E-Trade Financial
AAR (NYSE:AIR) has soared 13.3% to reach a current price of $14.36 per share. At 512,989 shares, the company's volume so far today is 1.3 times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin ratios highlight companies that are worth further examination. AIR has a low gross profit margin of 21.5%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. AIR has an operating profit margin of 6.7% and a net profit margin of 3.9%, both low compared to its gross profit margin.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for AIR is 40.2%. 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.
Sodastream (Nasdaq:SODA) has moved up 4.3% and is currently trading at $38.86 per share. So far today, the company's volume is 424,556 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. 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. SODA's gross profit margin is 56.5%. The operating profit margin is a rough measure of the operating leverage a company can achieve in the conduct of the operational part of its business. SODA's operating profit margin is 13.1%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. The company has a net profit margin of 10.2%.
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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. The P/E ratio for SODA is 22.1, above the industry average of 14.48. 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After rising 4%, MSC Industrial Direct Co (NYSE:MSM) is currently trading at a share price of $67.62. So far today, the company's volume is 359,427 shares, 0.6 times its current three-month average. Volume is used to evaluate how meaningful the price movement of a stock is. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. MSM has a gross profit margin of 47.4%. 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. Operating profit margin for MSM is 18.1%. Net profit margin is calculated by dividing net income by sales. Net margin is 11.1%.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. PEG ratio for MSM is consistent with the industry average at 1.17. 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.
Chart Industries (Nasdaq:GTLS) is currently trading at $65.18 per share, a 3.3% increase. The company's volume is currently 105,603 shares. Yesterday, 530,515 shares changed hands. The trading volume for a stock indicates the level of investor interest. Margin ratios highlight companies that are worth further examination. GTLS' gross profit margin is 33.1%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. GTLS' operating profit margin of 11% is low relative to its gross profit margin. Net profit margin examines how effectively a company is managed and how profitable it is by looking at how much of each dollar in revenues ultimately hits the company's bottom line. Net profit margin for the company is 6%.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The debt ratio is calculated by dividing total liabilities by total assets. GTLS has a debt ratio of 46.5%, 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Triumph Group (NYSE:TGI) is at $60.73 per share after an increase of 2.9%. The company's volume is currently 167,478 shares for the day, 0.3 times its current daily average. 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. TGI has a low gross profit margin of 24.2%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. TGI's operating margin of 19.4% and net margin of 8.2% are low relative to its gross margin.
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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. The dividend yield for TGI is 0.3%, which is on the low end. A company with a low dividend yield may be a safer investment in the long run. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Guide To Stock-Picking Strategies: Income Investing
Lindsay (NYSE:LNN) has risen 2.6% to hit a current price of $71.65 per share. So far today, 67,333 shares have changed hands. If a stock price moves on high volume, this means that the change is a significant one. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for LNN is 29.3%. Compared with its gross profit margin, LNN's operating profit margin of 16.7% and net profit margin of 7.5% are low.
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/sales ratio measures a company's stock market price by its revenues. LNN has a high P/S ratio of 1.31. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Flowserve (NYSE:FLS) is up 2.5% to reach a current price of $113.74 per share. The company's volume is currently 109,546 shares for the day, 0.2 times its average over the past three months. 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. 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. FLS has a gross profit margin of 35.6%. 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. FLS' operating profit margin of 13.3% is low relative to its gross profit margin. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. The company's net profit margin is 9.3%.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. FLS' stock is trading for more than its book value with a P/B ratio of 2.64. 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: How Buybacks Warps The Price-To-Book Ratio
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.
Outperforming the market overall, the Capital Goods sector (XLI) is up 1.6% and its biggest movers so far today are:
| Company | Market Cap | Percentage Change |
| AAR Corp. (NYSE:AIR) | $510.4 million | +13.3% |
| Sodastream International Limited (Nasdaq:SODA) | $750.3 million | +4.3% |
| MSC Industrial Direct Co Inc (NYSE:MSM) | $4.08 billion | +4% |
| Chart Industries, Inc. (Nasdaq:GTLS) | $1.89 billion | +3.3% |
| Triumph Group Inc (NYSE:TGI) | $2.95 billion | +2.9% |
| Lindsay Corporation (NYSE:LNN) | $887.8 million | +2.6% |
| Flowserve (NYSE:FLS) | $6.07 billion | +2.5% |
AAR (NYSE:AIR) has soared 13.3% to reach a current price of $14.36 per share. At 512,989 shares, the company's volume so far today is 1.3 times the average daily volume. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin ratios highlight companies that are worth further examination. AIR has a low gross profit margin of 21.5%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. AIR has an operating profit margin of 6.7% and a net profit margin of 3.9%, both low compared to its gross profit margin.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for AIR is 40.2%. 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.
Sodastream (Nasdaq:SODA) has moved up 4.3% and is currently trading at $38.86 per share. So far today, the company's volume is 424,556 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. 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. SODA's gross profit margin is 56.5%. The operating profit margin is a rough measure of the operating leverage a company can achieve in the conduct of the operational part of its business. SODA's operating profit margin is 13.1%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. The company has a net profit margin of 10.2%.
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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. The P/E ratio for SODA is 22.1, above the industry average of 14.48. 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Investment Valuation Ratios: Price/Earnings Ratio
After rising 4%, MSC Industrial Direct Co (NYSE:MSM) is currently trading at a share price of $67.62. So far today, the company's volume is 359,427 shares, 0.6 times its current three-month average. Volume is used to evaluate how meaningful the price movement of a stock is. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. MSM has a gross profit margin of 47.4%. 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. Operating profit margin for MSM is 18.1%. Net profit margin is calculated by dividing net income by sales. Net margin is 11.1%.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. PEG ratio for MSM is consistent with the industry average at 1.17. 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.
Chart Industries (Nasdaq:GTLS) is currently trading at $65.18 per share, a 3.3% increase. The company's volume is currently 105,603 shares. Yesterday, 530,515 shares changed hands. The trading volume for a stock indicates the level of investor interest. Margin ratios highlight companies that are worth further examination. GTLS' gross profit margin is 33.1%. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. GTLS' operating profit margin of 11% is low relative to its gross profit margin. Net profit margin examines how effectively a company is managed and how profitable it is by looking at how much of each dollar in revenues ultimately hits the company's bottom line. Net profit margin for the company is 6%.
Triumph Group (NYSE:TGI) is at $60.73 per share after an increase of 2.9%. The company's volume is currently 167,478 shares for the day, 0.3 times its current daily average. 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. TGI has a low gross profit margin of 24.2%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. TGI's operating margin of 19.4% and net margin of 8.2% are low relative to its gross margin.
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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. The dividend yield for TGI is 0.3%, which is on the low end. A company with a low dividend yield may be a safer investment in the long run. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Guide To Stock-Picking Strategies: Income Investing
Lindsay (NYSE:LNN) has risen 2.6% to hit a current price of $71.65 per share. So far today, 67,333 shares have changed hands. If a stock price moves on high volume, this means that the change is a significant one. Margin analysis is a great way to understand the profitability of companies. The gross profit margin for LNN is 29.3%. Compared with its gross profit margin, LNN's operating profit margin of 16.7% and net profit margin of 7.5% are low.
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/sales ratio measures a company's stock market price by its revenues. LNN has a high P/S ratio of 1.31. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Flowserve (NYSE:FLS) is up 2.5% to reach a current price of $113.74 per share. The company's volume is currently 109,546 shares for the day, 0.2 times its average over the past three months. 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. 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. FLS has a gross profit margin of 35.6%. 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. FLS' operating profit margin of 13.3% is low relative to its gross profit margin. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. The company's net profit margin is 9.3%.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. FLS' stock is trading for more than its book value with a P/B ratio of 2.64. 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: How Buybacks Warps The Price-To-Book Ratio
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.
by
Investopedia Staff
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