Filed Under: ,
Tickers in this Article: ESL, PNR, JOY, DRC, NC, CAT, FLS
The morning has been good for the market. The Nasdaq is up 0.8%; the S&P 500 is trading up 0.8%; and the Dow has climbed 0.9%. 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 0.9% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Esterline (NYSE:ESL)$1.63 billion+10.9%
Pentair (NYSE:PNR)$4.16 billion+2.9%
Joy Global (NYSE:JOY)$5.5 billion+2.8%
Dresser-Rand Group (NYSE:DRC)$3.73 billion+2.5%
NACCO Industries (NYSE:NC)$885.9 million+1.6%
Caterpillar (NYSE:CAT)$55.18 billion+1.6%
Flowserve (NYSE:FLS)$6.44 billion+1.4%
Beginner's Guide To Thinkorswim Trading Platform

Esterline (NYSE:ESL) is currently at $58.73 per share after a dramatic increase of 10.9%. This morning, the company is trading a volume of 593,880 shares. This is 3.1 times the average volume over the last three months. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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 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 capitalization ratio for ESL is 37.4%. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.

Rising 2.9%, Pentair (NYSE:PNR) is currently trading at $43.11 per share. So far today, the company's volume is 308,892 shares, 0.3 times the 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. PNR has a D/E ratio of 62%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Rising 2.8%, Joy Global (NYSE:JOY) is currently trading at $53.45 per share. The company is currently trading a volume of 1.1 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PEG ratio for JOY is consistent with the industry average at 0.45. 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.

After rising 2.5%, Dresser-Rand Group (NYSE:DRC) is currently trading at a share price of $50.50. So far today, 69,276 shares have changed hands, which is likely to result in less activity than yesterday's volume of 383,913 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. DRC's P/B ratio of 4.11 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. 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: How Buybacks Warps The Price-To-Book Ratio

NACCO Industries (NYSE:NC) has increased to a share price of $107.31, a 1.6% rise. The company's volume for the day so far is 5,183 shares. This is 0.3 times its current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. NC's dividend yield is 2.1%. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor. SEE: Due Diligence On Dividends

Increasing 1.6%, Caterpillar (NYSE:CAT) is trading at $85.79 per share. So far today, the company's volume is 2.4 million shares, 0.4 times the average daily volume. As a stock moves up or down, it is important to pay attention to the trading volume. This indicates the level of interest: the higher the volume, the more the interest. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. The P/E ratio for CAT is 9.4, below the industry average of 10.94. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

Flowserve (NYSE:FLS) has risen 1.4% to hit a current price of $127.81 per share. So far today, the company's volume is 214,896 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. FLS has a debt ratio of 56.8%. 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.

The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.

comments powered by Disqus

Trading Center