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Tickers in this Article: TTC, ESLT, LEN, NVR, GVA, AWI, SPW
The market is currently down, with the Nasdaq declining 0.2%, the S&P 500 falling 0.3% and the Dow decreasing 0.2%. 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 0.5%, underperforming the market overall. The current biggest movers in the sector are:
CompanyMarket CapPercentage Change
Toro (NYSE:TTC)$2.3 billion-4%
Elbit Systems Ltd (Nasdaq:ESLT)$1.3 billion+3.5%
Lennar (NYSE:LEN)$6.2 billion-3.5%
NVR (NYSE:NVR)$4.34 billion-3.1%
Granite Construction (NYSE:GVA)$1.03 billion+2.5%
Armstrong World Industries (NYSE:AWI)$2.55 billion-2.5%
SPX (NYSE:SPW)$3.37 billion-1.9%
Broker Summary: Charles Schwab Online Brokerage

Toro (NYSE:TTC) is down 4% to reach $37.53 per share. At 247,268 shares, the company's volume so far today is in keeping with the average volume over the past three months. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. Dividend yield for TTC is 2.3%. 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

Elbit Systems Ltd (Nasdaq:ESLT) is up 3.5% to reach a current price of $31.65 per share. This morning, the company is trading a volume of 4,785 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. ESLT's P/S ratio of 0.57 is fairly low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. 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.

Lennar (NYSE:LEN) has fallen 3.5% and is currently trading at $31.60 per share. So far today, the company's volume is 1.7 million shares, consistent with the volume from yesterday on pace to finish the day below yesterday's volume of 3.6 million shares. If a stock price moves on high volume, this means that the change is a significant one. 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 price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. LEN's P/B ratio of 1.88 shows that its share price is higher than its book value. This high share price relative to asset value is likely to indicate that the company has been earning a very high return on its assets. 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

At $818, NVR (NYSE:NVR) has slipped 3.1%. This morning, the company's volume is 7,925 shares. This is 0.2 times the 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. NVR's capitalization ratio is 0.2%, which is relatively low. A low capitalization ratio can signify a failure to leverage equity into investment, missing valuable opportunities for growth and expansion. 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.

Granite Construction (NYSE:GVA) has risen 2.5% to hit a current price of $27.36 per share. The company's volume for the day so far is 99,077 shares, consistent with its average 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. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). GVA's P/E ratio of 22.7 is above the industry average of 10.69. 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. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: Profit With The Power Of Price-To-Earnings

After a decline of 2.5%, Armstrong World Industries (NYSE:AWI) has hit a share price of $42.32. The company is currently trading a volume of 148,885 shares. Volume indicates the level of interest that investors have in a company at its current price. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. AWI's PEG ratio of 1.27 is in line with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

SPX (NYSE:SPW) is trading at $65.10 per share, down 1.9%. So far today, 193,305 shares have changed hands,. Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made a strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the 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 easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. The debt ratio for SPW is 70.5%, which is relatively high. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. 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.

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