The market is currently down, with the Nasdaq down 0.4%, the S&P 500 slipping 0.8% and the Dow declining 0.8%. 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 down 0.9%, underperforming the market overall. The current biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Eagle Materials, Inc. (NYSE:EXP)||$1.54 billion||+10.1%|
|Makita Corporation (ADR) (Nasdaq:MKTAY)||$4.72 billion||-4.6%|
|Spirit AeroSystems Holdings, Inc. (NYSE:SPR)||$3.28 billion||+4.5%|
|Sauer-Danfoss Inc. (NYSE:SHS)||$1.73 billion||-4%|
|Esterline Technologies Corporation (NYSE:ESL)||$1.76 billion||-3.1%|
|General Dynamics (NYSE:GD)||$22.74 billion||-2.6%|
|Quanta Services Inc (NYSE:PWR)||$4.7 billion||+2.6%|
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After a big jump of 10.1%, Eagle Materials (NYSE:EXP) is trading at $37.37 per share. So far today, the company's volume is 550,695 shares, one times the average daily volume. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The D/E ratio for EXP is 56%. 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.
At $32.72, Makita Corporation (Nasdaq:MKTAY) has slipped 4.6%. The company is currently trading a volume of 1,700 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. MKTAY's stock is trading for more than its book value with a P/B ratio of 1.14. 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
Spirit AeroSystems Holdings (NYSE:SPR) is at $24.02 per share after an increase of 4.5%. The company's volume is currently 627,144 shares for the day, 0.8 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. 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. The price/sales ratio measures a company's stock market price by its revenues. SPR has a P/S ratio of 0.69, on the low end. Low P/S ratios are more attractive than high ratios because this indicates that an investor is paying less for each dollar of sales. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
Currently trading at $34.22 per share, Sauer-Danfoss (NYSE:SHS) has fallen 4%. The company's volume is currently 49,493 shares. At this rate, trading activity will likely be down from yesterday when 207,144 shares changed hands. 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. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. SHS has a debt ratio of 60.6%, which is on the high side. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Esterline (NYSE:ESL) has fallen 3.1% and is currently trading at $55.45 per share. The company's volume is currently 66,508 shares for the day, 0.7 times the current daily average. Volume is an important indicator because it indicates how significant a price shift is. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. ESL's PEG ratio is 1.32. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
General Dynamics (NYSE:GD) is trading at $61.38 per share, down 2.6%. The company's volume for the day so far is 742,384 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. GD has a low capitalization ratio of 17.5%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
Quanta Services Inc (NYSE:PWR) has moved up 2.6% and is currently trading at $23.05 per share. The company's volume for the day so far is 2.1 million shares, 1.2 times the current three-month average. Volume indicates the level of interest that investors have in a company at its current price. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. The P/E ratio for PWR is 24.2, above the industry average of 11.89. This could mean that the market is expecting big things over the next few months or years. 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
The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.