The Nasdaq has risen 0.2%, the S&P 500 has remained steady and the Dow has been relatively flat so far today. 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.
These are the biggest movers in the Capital Goods sector (XLI) (+0.1%):
|Company||Market Cap||Percentage Change|
|US Silica Holdings Inc (NYSE:SLCA)||$559.4 million||+9.5%|
|Deere & Co (NYSE:DE)||$31.87 billion||-7.7%|
|AGCO Corporation (NYSE:AGCO)||$4.33 billion||-4.6%|
|CNH Global NV (ADR) (NYSE:CNH)||$9.86 billion||-4.6%|
|Dycom Industries, Inc. (NYSE:DY)||$596.7 million||+3.2%|
|Harsco Corporation (NYSE:HSC)||$1.7 billion||+2.6%|
|Emcor Group Inc (NYSE:EME)||$1.78 billion||+2.1%|
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US Silica Holdings (NYSE:SLCA) is at $11.57 per share after an increase of 9.5%. At 576,335 shares, the company's volume so far today is 1.3 times 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. SLCA's PEG ratio is 0.19. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
After a decline of 7.7%, Deere (NYSE:DE) has hit a share price of $74.00. The company's volume for the day so far is 9.5 million 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 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 DE is 71.7%, which is fairly high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. 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.
AGCO (NYSE:AGCO) has fallen 4.6% and is currently trading at $42.44 per share. So far today, the company's volume is 1.4 million shares, 1.4 times its average over the past three months. The trading volume for a stock indicates the level of investor 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). The P/E ratio for AGCO is 6.4, below the industry average of 12.07. 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. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio
CNH Global NV (NYSE:CNH) has decreased to $39.25 per share, a 4.6% fall. So far today, the company's volume is 192,058 shares. This is about the same trading activity as there was yesterday. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. CNH has a P/S ratio of 0.49, on the low end. Low P/S ratios can indicate unrecognized value potential - so long as other criteria like high profit margins, low debt levels and growth prospects are in place. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Dycom Industries (NYSE:DY) has risen 3.2% and is currently trading at $18.32 per share. At 79,974 shares, the company's volume so far today is 0.3 times the current daily average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. DY's P/B ratio of 1.63 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: How Buybacks Warps The Price-To-Book Ratio
Rising 2.6%, Harsco (NYSE:HSC) is currently trading at $21.58 per share. So far today, the company's volume is 123,597 shares. If a stock price moves on high volume, this means that the change is a significant one. 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. Dividend yield measures the income that a stock will generate for an investor. HSC has a dividend yield of 3.9%. 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: Investment Valuation Ratios: Dividend Yield
Emcor Group (NYSE:EME) is up 2.1% to reach a current price of $27.33 per share. At 74,189 shares, the company's volume so far today is 0.2 times the average volume over the last three months. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for EME is 56.8%. 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.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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.