The market is doing well so far today. The Nasdaq has moved up 0.7%; the S&P 500 has climbed 1%; and the Dow has risen 1.1%. 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 1% and its biggest movers so far today are:
|Company||Market Cap||Percentage Change|
|Esterline (NYSE:ESL)||$1.73 billion||+4.1%|
|Sodastream (Nasdaq:SODA)||$789 million||-3.7%|
|Fastenal (Nasdaq:FAST)||$12.73 billion||+3.6%|
|Pentair (NYSE:PNR)||$4.42 billion||-3.3%|
|Raytheon (NYSE:RTN)||$18.98 billion||-2.7%|
|National Presto Industries (NYSE:NPK)||$501.7 million||+2.5%|
|General Dynamics (NYSE:GD)||$23.33 billion||+1.9%|
Broker Summary: Charles Schwab Online Brokerage
Esterline (NYSE:ESL) has risen 4.1% to hit a current price of $58.44 per share. The company's volume for the day so far is 138,599 shares, 0.6 times the current three-month 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. 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. ESL's P/S ratio of 0.92 is fairly low. 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. 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.
Sodastream (Nasdaq:SODA) is currently trading at a share price of $37.72, a 3.7% decline. The company's volume for the day so far is 359,049 shares. If a stock price moves on high volume, this means that the change is a significant one. 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 debt ratio is calculated by dividing total liabilities by total assets. SODA has a low debt ratio of 29.6%. 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.
Increasing 3.6%, Fastenal (Nasdaq:FAST) is trading at $44.55 per share. The company's volume is currently 1.2 million shares for the day, in keeping with its current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. Dividend yield measures the income that a stock will generate for an investor. The dividend yield for FAST is 1.8%, which is on the low end. This could indicate that that the stock is overpriced or that future dividends might be higher. 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: Dividend Yield For The Downturn
Pentair (NYSE:PNR) has fallen 3.3% and is currently trading at $43.06 per share. The company's volume is currently 3.5 million shares. At this rate, trading activity will likely be down from yesterday when 27.9 million shares changed hands. A stock's volume conveys how excited investors are about it. 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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. PNR's P/E ratio of 92.7 is above the industry average of 17.79. 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 or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: The P/E Ratio: A Good Market-Timing Indicator
Raytheon (NYSE:RTN) is currently trading at a share price of $55.63, a 2.7% decline. The company's volume is currently 2.3 million shares for the day, 1.4 times its average over the past three months. High volume indicates a lot of investor interest while low volume indicates the opposite. 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 price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. RTN has a PEG ratio of 1.3. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
National Presto Industries (NYSE:NPK) has risen 2.5% and is currently trading at $74.73 per share. So far today, 1,965 shares have changed hands. The trading volume for a stock indicates the level of investor interest. Valuation ratios allow the investor to make a quick determination as to a company's investment value. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. The P/B ratio for NPK is 1.64, indicating that the stock is trading for more than its book value. 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. 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 1.9%, General Dynamics (NYSE:GD) is currently trading at $67.36 per share. So far today, the company's volume is 740,522 shares, in keeping with its current daily average. 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. A price/sales ratio is derived by dividing stock market price by company sales. GD has a low P/S ratio of 0.73. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
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. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.