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Tickers in this Article: TITN, MTH, PHM, DHI, TOL, MDC, LEN
The Nasdaq is trading down 0.2%, the S&P 500 has slipped 0.4% and the Dow has decreased 0.5%, marking a bad morning for the market. 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 0.8%, underperforming the market overall. The current biggest movers in the sector are:
CompanyMarket CapPercentage Change
Titan Machinery (Nasdaq:TITN)$547.2 million-6%
Meritage (NYSE:MTH)$1.29 billion+4.4%
PulteGroup (NYSE:PHM)$4.91 billion+4.2%
D.R. Horton, Inc (NYSE:DHI)$5.83 billion+4.2%
Toll Brothers, Inc (NYSE:TOL)$5.33 billion+3.8%
M.D.C. Holdings (NYSE:MDC)$1.58 billion+3.7%
Lennar (NYSE:LEN)$5.9 billion+3.7%
Forex Broker Summary: UFXMarkets

Titan Machinery (Nasdaq:TITN) has decreased to $24.56 per share, a 6% fall. The company's volume is currently 613,682 shares for the day, 1.6 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalizion ratio of 28.7% is on the low end. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Meritage (NYSE:MTH) is up 4.4% to reach a current price of $38.11 per share. So far today, 193,109 shares have changed hands. A stock's volume conveys how excited investors are about it. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. MTH's stock is trading for more than its book value with a P/B ratio of 2.72. This may be a sign that the company is overvalued. To put things in perspective, should be made among companies in the same industry rather than across industries. SEE: How Buybacks Warps The Price-To-Book Ratio

After an increase of 4.2%, PulteGroup (NYSE:PHM) has reached a current price of $13.33. With 10.8 million shares changing hands so far today, the company's volume is 0.7 times its average over the past three months. The trading volume for a stock indicates the level of investor interest. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. A price/sales ratio is derived by dividing stock market price by company sales. PHM has a P/S ratio of 0.94, on the low end. 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. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.

D.R. Horton, Inc (NYSE:DHI) has risen 4.2% and is currently trading at $19.01 per share. So far today, the company's volume is 4.4 million shares. If a stock price moves on high volume, this means that the change is a significant one. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. DHI's PEG ratio is 1.17. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Toll Brothers, Inc (NYSE:TOL) has increased to a share price of $33.01, a 3.8% rise. The company's volume is currently 6.5 million shares for the day, 2.6 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt-equity (D/E) ratio is a leverage ratio. TOL's D/E ratio is 74%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

M.D.C. Holdings (NYSE:MDC) has moved up 3.7% and is currently trading at $34.16 per share. The company is currently trading a volume of 479,269 shares. 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. 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. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. MDC's debt ratio is 53.1%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Lennar (NYSE:LEN) is at $32.33 per share after an increase of 3.7%. So far today, the company's volume is four million shares, 0.9 times the average volume over the last three months. 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). Relative to the industry P/E ratio of 29.13, LEN's 12.8 is low. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. 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: How To Find P/E And PEG Ratios

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.

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