The market is doing well so far today. The Nasdaq is up 1.9%; the S&P 500 is trading up 1.8%; and the Dow has climbed 1.7%. 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.
Outperforming the market overall, the Capital Goods sector (XLI) is up 2% and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|AeroVironment (Nasdaq:AVAV)||$539.2 million||-10.2%|
|Gardner Denver (NYSE:GDI)||$2.87 billion||+4.6%|
|Triumph Group (NYSE:TGI)||$2.91 billion||+3.5%|
|Chart Industries (Nasdaq:GTLS)||$2.07 billion||+3.5%|
|Cummins (NYSE:CMI)||$18.15 billion||+3.1%|
|NACCO Industries (NYSE:NC)||$880.8 million||+3%|
|Valmont Industries (NYSE:VMI)||$3.44 billion||+2.7%|
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Shares of AeroVironment (Nasdaq:AVAV) are currently trading at $21.76, a steep decline of 10.2%. The company's volume is currently 361,778 shares for the day, 3.6 times the average daily volume. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for AVAV is a high 1.66. 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.
Gardner Denver (NYSE:GDI) is currently trading at $61.36 per share, a 4.6% increase. This morning, the company is trading a volume of 170,481 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for GDI is a low 47.2%. 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Triumph Group (NYSE:TGI) is up 3.5% to reach a current price of $60.39 per share. The company's volume for the day so far is 91,476 shares, 0.2 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. 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. The capitalization ratio for TGI is 34.2%. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
Rising 3.5%, Chart Industries (Nasdaq:GTLS) is currently trading at $71.61 per share. So far today, 249,082 shares of the company's stock have changed hands. This is about the same trading activity as there was yesterday. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. GTLS has a debt-equity ratio of 40%, which is on the low side. This shows that the company's assets are financed primarily through equity. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
After rising 3.1%, Cummins (NYSE:CMI) is currently trading at a share price of $98.32. The company's volume is currently 832,626 shares for the day, in keeping with 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. 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. CMI's P/E ratio is 9.5. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: How To Find P/E And PEG Ratios
NACCO Industries (NYSE:NC) has risen 3% and is currently trading at $108.11 per share. So far today, the company's volume is 4,100 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. NC's P/B ratio of 1.47 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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
Increasing 2.7%, Valmont Industries (NYSE:VMI) is trading at $132.71 per share. The company's volume is currently 28,795 shares for the day, 0.3 times the average volume over the last three months. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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 VMI is 0.7%, which is on the low end. If you are an income investor, this stock may not be attractive to you. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Dividend Yield For The Downturn
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. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.