The market has been slipping so far today. The Nasdaq has slipped 0.3%; the S&P 500 has fallen 0.4%; and the Dow has declined 0.5%. 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.
The Consumer Cyclical sector (XLY) is currently lagging behind the overall market, down 0.4%, and its current biggest movers are:
|Company||Market Cap||Percentage Change|
|Visteon Corporation (NYSE:VC)||$2.04 billion||+8.2%|
|Movado Group, Inc (NYSE:MOV)||$660.7 million||-4.2%|
|Navistar International Corporation (NYSE:NAV)||$1.78 billion||-3.4%|
|Nortek Inc (Nasdaq:NTK)||$782.8 million||-2.5%|
|Oxford Industries, Inc. (NYSE:OXM)||$785.4 million||-2.4%|
|Fossil, Inc. (Nasdaq:FOSL)||$5.26 billion||-1.9%|
|Arctic Cat Inc (Nasdaq:ACAT)||$575.9 million||-1.9%|
Broker Summary: TD Ameritrade Thinkorswim
Visteon (NYSE:VC) has increased to a share price of $42.00, a 8.2% rise. So far today, 2.2 million shares of the company's stock have changed hands. This is more trading activity than there was yesterday. Volume is an important indicator because it indicates how significant a price shift is. Understanding investment valuation ratios allows an investor to assess the true value of an individual 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. The P/S ratio for VC is 0.27, which is relatively low. 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. 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.
Movado Group (NYSE:MOV) is down 4.2% to reach $25.18 per share. The company's volume is currently 43,010 shares for the day, 0.3 times the average daily volume. If a stock price makes a big move up or down, volume lets us know the significance of that move. Valuation ratios like 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 are useful in determining how attractive a potential or existing investment is. The debt ratio shows the proportion of assets that a company is financing through debt. The debt ratio for MOV is a low 20.7%. A low debt ratio means the company has more available cash flow. 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.
Currently trading at $25.15 per share, Navistar (NYSE:NAV) has fallen 3.4%. The company's volume for the day so far is 266,104 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 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. NAV has a high capitalization ratio of 118%. If the company is a company is in a highly competitive business and hobbled by high debt, it will find its competitors taking advantage of its problems to grab more market share. 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.
At $50.36, Nortek (Nasdaq:NTK) has slipped 2.5%. The company's volume for the day so far is 3,890 shares, 0.2 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. NTK has a high D/E ratio of 1369%. Companies in capital-intensive industries usually have higher D/E ratios because they need to buy more property, plants, and equipment to operate. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Oxford Industries (NYSE:OXM) is currently trading at a share price of $46.34, a 2.4% decline. The company's volume is currently 10,718 shares. This is on pace to fall short of yesterday's volume of 112,770 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). Compared to the industry average of 20.35, OXM's P/E ratio of 26.7 is quite high. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Profit With The Power Of Price-To-Earnings
Fossil (Nasdaq:FOSL) has decreased to $84.83 per share, a 1.9% fall. The company's volume is currently 349,056 shares for the day, 0.2 times the average daily volume. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. FOSL's stock is trading for more than its book value with a P/B ratio of 4.6. This may be a sign that the company is overvalued. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Falling 1.9%, Arctic Cat (Nasdaq:ACAT) is currently at a share price of $42.98. The company is currently trading a volume of 61,820 shares. The trading volume for a stock indicates the level of investor interest. A company's investment value can be 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. The assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. ACAT's PEG ratio of 1.0 is in line with the industry average. While P/E ratios are important indicators of market value, a high P/E in and of itself is not bad because it may indicate a company whose earnings are growing very rapidly, so many investors look at the PEG ratio in order to get an idea of whether or not a particular P/E ratio is justified by underlying earnings growth.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.