The market is having a bad day so far. The Nasdaq has declined 0.3%; the S&P 500 is trading down 0.2%; and the Dow has fallen 0.2%. 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.

On a bad day for the market overall, the Capital Goods sector (XLI) has shown little change and its biggest movers so far today are:


CompanyMarket CapPercentage Change
China Yuchai International Limited (NYSE:CYD)$505.3 million-6.8%
HEICO Corporation (NYSE:HEI)$1.9 billion-3.6%
Titan Machinery Inc. (Nasdaq:TITN)$613 million-3.1%
Graco Inc. (NYSE:GGG)$2.95 billion+3%
Harsco Corporation (NYSE:HSC)$1.68 billion+2.9%
Alliant Techsystems Inc. (NYSE:ATK)$1.58 billion-2.8%
Chicago Bridge & Iron Company N.V. (NYSE:CBI)$3.68 billion-1.9%
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Falling 6.8%, China Yuchai (NYSE:CYD) is currently at a share price of $12.85. The company is trading at a volume of 59,119 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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 debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. CYD's debt ratio of 71.2% is fairly high. This means that most of the company's assets are financed through debt. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

At $34.73, HEICO (NYSE:HEI) has slipped 3.6%. So far today, the company's volume is 105,701 shares, in keeping with its current daily average. Volume is an important indicator because it indicates how significant a price shift is. 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 P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. HEI has a P/E ratio of 24.6. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Profit With The Power Of Price-To-Earnings

After a decline of 3.1%, Titan Machinery (Nasdaq:TITN) has hit a share price of $28.35. The company's volume for the day so far is 142,398 shares. A stock's volume conveys how excited investors are about it. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. TITN has a D/E ratio of 200%, which is relatively high. Companies in capital-intensive industries usually have higher D/E ratios because they need to buy more property, plants, and equipment to operate. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Graco (NYSE:GGG) has moved up 3% and is currently trading at $50.18 per share. The company's volume is currently 214,575 shares for the day, 0.7 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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 GGG is 61.6%, which is fairly high. If the company is a company is in a highly competitive business and hobbled by high debt, it will find its competitors taking advantage of its problems to grab more market share. 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.

Harsco (NYSE:HSC) has risen 2.9% to hit a current price of $21.49 per share. So far today, 164,179 shares of the company's stock have changed hands. This is on pace to reach yesterday's trading volume of 347,136 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. HSC has a P/B ratio of 1.56 which shows that its share price is higher 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Investment Valuation Ratios: Price/Book Value Ratio

Alliant Techsystems (NYSE:ATK) has decreased to $50.47 per share, a 2.8% fall. The company's volume is currently 195,119 shares for the day, 0.9 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. 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. 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. The dividend yield for ATK is 1.6%, which is on the low end. If you are an income investor, this stock may not be attractive to you. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Guide To Stock-Picking Strategies: Income Investing

Chicago Bridge & Iron Company (NYSE:CBI) is currently trading at a share price of $37.33, a 1.9% decline. The company is currently trading a volume of 1.7 million shares. 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. 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 value by its total revenues or alternatively, a company's price per share by its revenue per share. CBI has a P/S ratio of 0.73, on the low end. A company with a lower P/S ratio is generally considered more attractive, since investors are 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.

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.



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Tickers in this Article: CYD, HEI, TITN, GGG, HSC, ATK, CBI

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