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Consumer Cyclical Stocks Making Big Moves on July 19, 2012
The market is on the rise this morning. The Nasdaq has climbed 1.1%; the S&P 500 has increased 0.3%; and the Dow is trading up 0.3%. The consumer cyclical sector is a category of stocks that relies heavily on the business cycle and economic conditions. Consumer cyclicals include industries such as automotive, housing, entertainment and retail. The category can be further divided into durable and non-durable sections. Durable cyclicals include physical goods such as hardware or vehicles, while non-durables represent items like movies or hotel services. The performance of consumer cyclicals is highly related to the state of the economy. They represent goods and services that are not considered necessities, but luxurious purchases. During contractions or recessions, people have less disposable income to spend on consumer cyclicals. When the economy is expanding or booming, the sales of these goods rise as retail and leisure spending increase.
Underperforming the market overall, the Consumer Cyclical sector (XLY) is up 1%, and these are its current biggest movers:
Broker Summary: Charles Schwab Online Brokerage
Select (Nasdaq:SCSS) is trading at $27.39 per share, a significant rise of 25.8%. So far today, 3.5 million shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. The gross profit margin for SCSS is 64.8%. Relative to its gross profit margin, SCSS' operating profit margin of 13.1% and net profit margin of 8.2% are high.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for SCSS is a low 46.9%. 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. 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.
Snap-on (NYSE:SNA) has moved up 8.6% and is currently trading at $66.60 per share. This morning, 581,022 shares have been traded, while it was 790,548 shares yesterday. The trading volume for a stock indicates the level of investor interest. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. SNA's gross profit margin is 49.4%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. SNA's operating profit margin is 16.5%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company's net profit margin is 10.1%.
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 measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. SNA's D/E ratio is 61%. 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.
Pool (Nasdaq:POOL) is trading at $37.51 per share, down 7.4%. This morning, the company is trading a volume of 922,860 shares. This is 3.6 times the current three-month 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. Margin ratios highlight companies that are worth further examination. POOL has a gross profit margin of 30.2%. 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. POOL has an operating profit margin of 1.7%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 4.1%.
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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. POOL has a P/E ratio of 25.5, high compared to the industry average of 19.99. This could mean that the market is expecting big things over the next few months or years. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Understanding The P/E Ratio
At $26.35, Johnson Controls (NYSE:JCI) has slipped 7%. At 9.8 million shares, the company's volume so far today is 2.1 times its current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. JCI has a low gross profit margin of 16.9%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. Compared with its gross profit margin, JCI's operating profit margin of 4.5% and net profit margin of 4% are low.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. JCI has a capitalization ratio of 32.7%. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Rising 6.7%, VF (NYSE:VFC) is currently trading at $151.34 per share. This morning, the company is trading a volume of 1.2 million shares. A stock's volume conveys how excited investors are about it. 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. VFC has a gross profit margin of 47.5%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. Operating profit margin for VFC is 12.3%. 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 9%.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. VFC has a PEG ratio of 1.43, 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.
Polo Ralph Lauren (NYSE:RL) has increased to a share price of $152.37, a 5.5% rise. So far today, the company's volume is 706,764 shares, below yesterday's volume of 1.6 million shares. 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 price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. RL has a P/B ratio of 3.87 which shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. 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: Using The Price-To-Book Ratio To Evaluate Companies
Fossil (Nasdaq:FOSL) is currently trading at $71.18 per share, a 4.5% increase. So far today, the company's volume is 550,469 shares. This is 0.4 times its average volume over the past three months. 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. 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. FOSL's gross profit margin is 58.1%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. FOSL has an operating profit margin of 14.1%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company's net profit margin is 11.3%.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for FOSL is a high 3.11. This could be a good sign if the share price increases. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
Underperforming the market overall, the Consumer Cyclical sector (XLY) is up 1%, and these are its current biggest movers:
| Company | Market Cap | Percentage Change |
| Select Comfort Corp. (Nasdaq:SCSS) | $1.23 billion | +25.8% |
| Snap-on Incorporated (NYSE:SNA) | $3.56 billion | +8.6% |
| Pool Corporation (Nasdaq:POOL) | $1.92 billion | -7.4% |
| Johnson Controls (NYSE:JCI) | $19.26 billion | -7% |
| VF (NYSE:VFC) | $15.54 billion | +6.7% |
| Polo Ralph Lauren (NYSE:RL) | $8.75 billion | +5.5% |
| Fossil, Inc. (Nasdaq:FOSL) | $4.22 billion | +4.5% |
Select (Nasdaq:SCSS) is trading at $27.39 per share, a significant rise of 25.8%. So far today, 3.5 million shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. The gross profit margin for SCSS is 64.8%. Relative to its gross profit margin, SCSS' operating profit margin of 13.1% and net profit margin of 8.2% are high.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for SCSS is a low 46.9%. 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. 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.
Snap-on (NYSE:SNA) has moved up 8.6% and is currently trading at $66.60 per share. This morning, 581,022 shares have been traded, while it was 790,548 shares yesterday. The trading volume for a stock indicates the level of investor interest. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. SNA's gross profit margin is 49.4%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. SNA's operating profit margin is 16.5%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company's net profit margin is 10.1%.
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 measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. SNA's D/E ratio is 61%. 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.
Pool (Nasdaq:POOL) is trading at $37.51 per share, down 7.4%. This morning, the company is trading a volume of 922,860 shares. This is 3.6 times the current three-month 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. Margin ratios highlight companies that are worth further examination. POOL has a gross profit margin of 30.2%. 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. POOL has an operating profit margin of 1.7%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 4.1%.
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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. POOL has a P/E ratio of 25.5, high compared to the industry average of 19.99. This could mean that the market is expecting big things over the next few months or years. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Understanding The P/E Ratio
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. JCI has a capitalization ratio of 32.7%. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Rising 6.7%, VF (NYSE:VFC) is currently trading at $151.34 per share. This morning, the company is trading a volume of 1.2 million shares. A stock's volume conveys how excited investors are about it. 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. VFC has a gross profit margin of 47.5%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. Operating profit margin for VFC is 12.3%. 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 9%.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. VFC has a PEG ratio of 1.43, 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.
Polo Ralph Lauren (NYSE:RL) has increased to a share price of $152.37, a 5.5% rise. So far today, the company's volume is 706,764 shares, below yesterday's volume of 1.6 million shares. 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 price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. RL has a P/B ratio of 3.87 which shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. 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: Using The Price-To-Book Ratio To Evaluate Companies
Fossil (Nasdaq:FOSL) is currently trading at $71.18 per share, a 4.5% increase. So far today, the company's volume is 550,469 shares. This is 0.4 times its average volume over the past three months. 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. 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. FOSL's gross profit margin is 58.1%. Investors in growth stocks or short-term traders may be less interested in the operating margin ratio. FOSL has an operating profit margin of 14.1%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company's net profit margin is 11.3%.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for FOSL is a high 3.11. This could be a good sign if the share price increases. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
by
Investopedia Staff
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