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Cummins and More Big Movers in Capital Goods on September 14, 2012
The morning has been good for the market. The Nasdaq has moved up 1.1%; the S&P 500 has climbed 0.6%; and the Dow has risen 0.4%. 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.
Underperforming the market overall, the Capital Goods sector (XLI) is up 0.9%, and these are its current biggest movers:
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Joy Global (NYSE:JOY) has risen 5.5% to hit a current price of $62.21 per share. So far today, the company's volume is 2.4 million shares, 0.9 times its current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). Relative to the industry P/E ratio of 11.36, JOY's 8.4 is low. 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Find P/E And PEG Ratios
CNH Global NV (NYSE:CNH) has increased to a share price of $44.14, a 5.4% rise. The company's volume for the day so far is 400,524 shares. Yesterday, volume was only 375,011 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 price/sales ratio measures a company's stock market price by its revenues. CNH has a low P/S ratio of 0.49. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.
Increasing 5.4%, Martin Marietta Materials (NYSE:MLM) is trading at $92.89 per share. So far today, the company's volume is 437,826 shares, 0.8 times its 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. Understanding investment valuation ratios allows an 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 MLM is 56.1%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Vulcan Materials (NYSE:VMC) has risen 5.4% and is currently trading at $49.49 per share. So far today, 665,585 shares have 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. 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. VMC has a D/E ratio of 75%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Cummins (NYSE:CMI) is up 3.9% to reach a current price of $104.06 per share. With 1.2 million shares changing hands so far today, the company's volume is 0.6 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CMI's capitalization ratio is 9.7%, which is relatively low. Low leverage is a significant balance sheet strength, a sign of a less risky investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Fluor (NYSE:FLR) has moved up 3.4% and is currently trading at $60.37 per share. So far today, the company's volume is 1.3 million shares. 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. The dividend yield is calculated by dividing a company's dividends per share by its stock price. FLR has a dividend yield of 1.1%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. 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: Due Diligence On Dividends
Rising 3.3%, NACCO Industries (NYSE:NC) is currently trading at $113.99 per share. At 11,494 shares, the company's volume so far today is consistent with its current daily average. 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. NC's stock is trading for more than its book value with a P/B ratio of 1.55. 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
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. 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 Capital Goods sector (XLI) is up 0.9%, and these are its current biggest movers:
| Company | Market Cap | Percentage Change |
| Joy Global (NYSE:JOY) | $6.24 billion | +5.5% |
| CNH Global NV (NYSE:CNH) | $10.04 billion | +5.4% |
| Martin Marietta Materials (NYSE:MLM) | $4.04 billion | +5.4% |
| Vulcan Materials (NYSE:VMC) | $6.08 billion | +5.4% |
| Cummins (NYSE:CMI) | $19.08 billion | +3.9% |
| Fluor (NYSE:FLR) | $9.75 billion | +3.4% |
| NACCO Industries (NYSE:NC) | $925.7 million | +3.3% |
Joy Global (NYSE:JOY) has risen 5.5% to hit a current price of $62.21 per share. So far today, the company's volume is 2.4 million shares, 0.9 times its current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). Relative to the industry P/E ratio of 11.36, JOY's 8.4 is low. 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. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Find P/E And PEG Ratios
CNH Global NV (NYSE:CNH) has increased to a share price of $44.14, a 5.4% rise. The company's volume for the day so far is 400,524 shares. Yesterday, volume was only 375,011 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 price/sales ratio measures a company's stock market price by its revenues. CNH has a low P/S ratio of 0.49. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.
Increasing 5.4%, Martin Marietta Materials (NYSE:MLM) is trading at $92.89 per share. So far today, the company's volume is 437,826 shares, 0.8 times its 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. Understanding investment valuation ratios allows an 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 MLM is 56.1%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Vulcan Materials (NYSE:VMC) has risen 5.4% and is currently trading at $49.49 per share. So far today, 665,585 shares have 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. 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. VMC has a D/E ratio of 75%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Cummins (NYSE:CMI) is up 3.9% to reach a current price of $104.06 per share. With 1.2 million shares changing hands so far today, the company's volume is 0.6 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CMI's capitalization ratio is 9.7%, which is relatively low. Low leverage is a significant balance sheet strength, a sign of a less risky investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
Fluor (NYSE:FLR) has moved up 3.4% and is currently trading at $60.37 per share. So far today, the company's volume is 1.3 million shares. 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. The dividend yield is calculated by dividing a company's dividends per share by its stock price. FLR has a dividend yield of 1.1%, which is fairly low. A company with a low dividend yield may be a safer investment in the long run. 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: Due Diligence On Dividends
Rising 3.3%, NACCO Industries (NYSE:NC) is currently trading at $113.99 per share. At 11,494 shares, the company's volume so far today is consistent with its current daily average. 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. NC's stock is trading for more than its book value with a P/B ratio of 1.55. 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
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. 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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