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Cummins and Other Capital Goods Stocks Making Big Moves on August 30, 2012
The market is having a bad day so far: the Nasdaq is down 0.9%; the S&P 500 has declined 0.7%; and the Dow has decreased 0.7%. 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 down 0.7%, outperforming the market overall. Currently, the biggest movers in the sector are:
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After an increase of 3.2%, Elbit Systems Ltd (Nasdaq:ESLT) has reached a current price of $30.92. With 3,650 shares changing hands so far today, the company's volume is 0.3 times the 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/sales ratio measures a company's stock market price by its revenues. ESLT has a P/S ratio of 0.51, 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 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.
Joy Global (NYSE:JOY) has fallen 3% and is currently trading at $52.79 per share. This morning, the company's volume is 1.7 million shares. This is in line with its current daily average. High volume indicates a lot of investor interest while low volume indicates the opposite. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for JOY is 40.1%. 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.
Martin Marietta Materials (NYSE:MLM) is currently trading at a share price of $74.68, a 2.8% decline. This morning, 167,567 shares have been traded, which is likely to result in less activity than yesterday's volume of 483,582 shares. The trading volume for a stock indicates the level of investor interest. 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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The D/E ratio for MLM is 81%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Vulcan Materials (NYSE:VMC) is trading at $38.93 per share, down 2.7%. The company is currently trading a volume of 172,889 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. 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. 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. VMC has a P/B ratio of 1.35 which 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: How Buybacks Warps The Price-To-Book Ratio
Slipping 2.3%, Dresser-Rand Group (NYSE:DRC) is currently trading at $49.45 per share. The company's volume is currently 80,100 shares for the day, 0.2 times the average volume over the last three months. Volume is used to evaluate how meaningful the price movement of a stock is. 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). Compared to the industry average of 13.71, DRC's P/E ratio of 23.4 is quite high. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Can Investors Trust the P/E Ratio?
Chart Industries (Nasdaq:GTLS) has decreased to $68.39 per share, a 1.8% fall. The company's volume for the day so far is 84,429 shares. This is 0.2 times the average daily volume. Volume indicates the level of interest that investors have in a company at its current price. 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 debt ratio is calculated by dividing total liabilities by total assets. GTLS' debt ratio of 46.4% is on the low side. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
At $96.23, Cummins (NYSE:CMI) has slipped 1.5%. So far today, 748,122 shares have changed hands, lighter than yesterday's volume of 1.9 million shares. 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 provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. CMI has a P/S ratio of 1.0. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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 down 0.7%, outperforming the market overall. Currently, the biggest movers in the sector are:
| Company | Market Cap | Percentage Change |
| Elbit Systems Ltd (Nasdaq:ESLT) | $1.27 billion | +3.2% |
| Joy Global (NYSE:JOY) | $5.76 billion | -3% |
| Martin Marietta Materials (NYSE:MLM) | $3.52 billion | -2.8% |
| Vulcan Materials (NYSE:VMC) | $5.17 billion | -2.7% |
| Dresser-Rand Group (NYSE:DRC) | $3.83 billion | -2.3% |
| Chart Industries (Nasdaq:GTLS) | $2.08 billion | -1.8% |
| Cummins (NYSE:CMI) | $18.6 billion | -1.5% |
After an increase of 3.2%, Elbit Systems Ltd (Nasdaq:ESLT) has reached a current price of $30.92. With 3,650 shares changing hands so far today, the company's volume is 0.3 times the 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/sales ratio measures a company's stock market price by its revenues. ESLT has a P/S ratio of 0.51, 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 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.
Joy Global (NYSE:JOY) has fallen 3% and is currently trading at $52.79 per share. This morning, the company's volume is 1.7 million shares. This is in line with its current daily average. High volume indicates a lot of investor interest while low volume indicates the opposite. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for JOY is 40.1%. 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.
Martin Marietta Materials (NYSE:MLM) is currently trading at a share price of $74.68, a 2.8% decline. This morning, 167,567 shares have been traded, which is likely to result in less activity than yesterday's volume of 483,582 shares. The trading volume for a stock indicates the level of investor interest. 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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The D/E ratio for MLM is 81%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Vulcan Materials (NYSE:VMC) is trading at $38.93 per share, down 2.7%. The company is currently trading a volume of 172,889 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. 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. 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. VMC has a P/B ratio of 1.35 which 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: How Buybacks Warps The Price-To-Book Ratio
Slipping 2.3%, Dresser-Rand Group (NYSE:DRC) is currently trading at $49.45 per share. The company's volume is currently 80,100 shares for the day, 0.2 times the average volume over the last three months. Volume is used to evaluate how meaningful the price movement of a stock is. 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). Compared to the industry average of 13.71, DRC's P/E ratio of 23.4 is quite high. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: Can Investors Trust the P/E Ratio?
Chart Industries (Nasdaq:GTLS) has decreased to $68.39 per share, a 1.8% fall. The company's volume for the day so far is 84,429 shares. This is 0.2 times the average daily volume. Volume indicates the level of interest that investors have in a company at its current price. 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 debt ratio is calculated by dividing total liabilities by total assets. GTLS' debt ratio of 46.4% is on the low side. A low debt ratio means the company has more available cash flow. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
At $96.23, Cummins (NYSE:CMI) has slipped 1.5%. So far today, 748,122 shares have changed hands, lighter than yesterday's volume of 1.9 million shares. 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 provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. CMI has a P/S ratio of 1.0. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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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