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Capital Goods Stocks Making Big Moves on July 13, 2012
The market is having a good day so far: the Nasdaq is up 1%; the S&P 500 has climbed 1.3%; and the Dow has moved up 1.3%. 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 up 1.4%, outperforming the market overall. The biggest movers in the sector so far are:
Broker Summary: Fidelity Online Brokerage
Colfax (NYSE:CFX) is at $27.30 per share after an increase of 7%. This morning, the company is trading a volume of 868,586 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. CFX's gross profit margin is 36.7%. CFX's operating and net profit margins are both negative. This is because the company reported a net loss and net operating loss in the most recent quarter.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt-equity (D/E) ratio is a leverage ratio. The D/E ratio for CFX is 88%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
James Hardie Industries SE (NYSE:JHX) has risen 4.9% and is currently trading at $42 per share. The company's volume is currently 1,300 shares for the day, 0.4 times the current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. JHX's operating profit margin is -2.4%. This is because the company reported a net operating loss in the most recent quarter.
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 favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. The P/B ratio for JHX is 28.97, indicating that the stock is trading for more than its book value. 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. 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
After rising 4.1%, Robbins & Myers (NYSE:RBN) is currently trading at a share price of $43.38. This morning, the company's volume is 104,125 shares. This is 0.2 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. 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. RBN has a gross profit margin of 42.5%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). RBN's operating profit margin of 23.2% is low relative to its gross profit margin. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company has a net profit margin of 15.1%.
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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. Relative to the industry P/E ratio of 30.31, RBN's 8.7 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio
Lennox International (NYSE:LII) has moved up 4.1% and is currently trading at $48.46 per share. The company's volume is currently 356,329 shares for the day, while it was 471,009 shares yesterday. If a stock price moves on high volume, this means that the change is a significant one. 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. The gross profit margin for LII is 27.1%. Net profit margin is a good ratio for determining how a company is performing. The company's net profit margin of 2.7% is low relative to its gross profit margin. A company with a low or negative net profit margin can potentially increase its profitability by taking steps to reduce costs and increase sales. The operating margin ratio is calculated by dividing operating income by sales and provides a measure of what percentage of a company's revenues is available to pay its fixed costs. Operating profit margin for LII is 0.6%.
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 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. LII has a PEG ratio of 1.59, which is consistent with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Rising 3.5%, Watsco (NYSE:WSO) is currently trading at $77.88 per share. The company's volume for the day so far is 87,840 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. WSO has a low gross profit margin of 24.2%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. WSO's operating margin of 3.1% and net margin of 3% are low relative to its gross margin.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. WSO's dividend yield is 3.3%. 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
Gardner Denver (NYSE:GDI) is up 3.2% to reach a current price of $52.62 per share. The company's volume for the day so far is 121,357 share, 0.2 times its average over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The gross profit margin for GDI is 36.4%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. GDI has an operating profit margin of 13.2%, which is low relative to its gross profit margin. Net profit margin is calculated by dividing net income by sales. Net profit margin for the company is 11.2%.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. A price/sales ratio is derived by dividing stock market price by company sales. GDI's P/S ratio of 1.31 is on the high side. This could be a good sign if the share price increases. 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.
Deere (NYSE:DE) is down 2.2% to reach $76.56 per share. So far today, the company's volume is 2.3 million shares. This is 0.7 times its 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. Margin ratios highlight companies that are worth further examination. DE has a gross profit margin of 30%. DE has an operating profit margin of 16% and a net profit margin of 9.3%, 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 debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. The debt ratio for DE is 85.6%, which is relatively high. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.
The Capital Goods sector (XLI) is up 1.4%, outperforming the market overall. The biggest movers in the sector so far are:
| Company | Market Cap | Percentage Change |
| Colfax Corporation (NYSE:CFX) | $2.39 billion | +7% |
| James Hardie Industries SE (ADR) (NYSE:JHX) | $3.49 billion | +4.9% |
| Robbins & Myers, Inc. (NYSE:RBN) | $1.77 billion | +4.1% |
| Lennox International Inc. (NYSE:LII) | $2.37 billion | +4.1% |
| Watsco Inc (NYSE:WSO) | $2.59 billion | +3.5% |
| Gardner Denver, Inc. (NYSE:GDI) | $2.55 billion | +3.2% |
| Deere & Co (NYSE:DE) | $31.13 billion | -2.2% |
Colfax (NYSE:CFX) is at $27.30 per share after an increase of 7%. This morning, the company is trading a volume of 868,586 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. CFX's gross profit margin is 36.7%. CFX's operating and net profit margins are both negative. This is because the company reported a net loss and net operating loss in the most recent quarter.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The debt-equity (D/E) ratio is a leverage ratio. The D/E ratio for CFX is 88%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
James Hardie Industries SE (NYSE:JHX) has risen 4.9% and is currently trading at $42 per share. The company's volume is currently 1,300 shares for the day, 0.4 times the current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. JHX's operating profit margin is -2.4%. This is because the company reported a net operating loss in the most recent quarter.
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 favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. The P/B ratio for JHX is 28.97, indicating that the stock is trading for more than its book value. 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. 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
After rising 4.1%, Robbins & Myers (NYSE:RBN) is currently trading at a share price of $43.38. This morning, the company's volume is 104,125 shares. This is 0.2 times the current daily average. Volume is used to evaluate how meaningful the price movement of a stock is. 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. RBN has a gross profit margin of 42.5%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). RBN's operating profit margin of 23.2% is low relative to its gross profit margin. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. The company has a net profit margin of 15.1%.
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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. Relative to the industry P/E ratio of 30.31, RBN's 8.7 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio
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 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. LII has a PEG ratio of 1.59, which is consistent with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Rising 3.5%, Watsco (NYSE:WSO) is currently trading at $77.88 per share. The company's volume for the day so far is 87,840 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. WSO has a low gross profit margin of 24.2%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. WSO's operating margin of 3.1% and net margin of 3% are low relative to its gross margin.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. WSO's dividend yield is 3.3%. 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
Gardner Denver (NYSE:GDI) is up 3.2% to reach a current price of $52.62 per share. The company's volume for the day so far is 121,357 share, 0.2 times its average over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The gross profit margin for GDI is 36.4%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. GDI has an operating profit margin of 13.2%, which is low relative to its gross profit margin. Net profit margin is calculated by dividing net income by sales. Net profit margin for the company is 11.2%.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. A price/sales ratio is derived by dividing stock market price by company sales. GDI's P/S ratio of 1.31 is on the high side. This could be a good sign if the share price increases. 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.
Deere (NYSE:DE) is down 2.2% to reach $76.56 per share. So far today, the company's volume is 2.3 million shares. This is 0.7 times its 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. Margin ratios highlight companies that are worth further examination. DE has a gross profit margin of 30%. DE has an operating profit margin of 16% and a net profit margin of 9.3%, 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 debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. The debt ratio for DE is 85.6%, which is relatively high. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. It is important to weigh current activity against historical performance when making any investment decisions. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.
by
Investopedia Staff
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