On a good day for the market, the Nasdaq has increased 0.8%, the S&P 500 has risen 0.8% and the Dow has moved up 0.9%. 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 up 0.7%, underperforming the market overall. The biggest movers in the sector are currently:
|Company||Market Cap||Percentage Change|
|Navistar (NYSE:NAV)||$1.47 billion||+8.4%|
|Dorman Products (Nasdaq:DORM)||$1.05 billion||+3.7%|
|Whirlpool (NYSE:WHR)||$5.76 billion||+2.7%|
|Michael Kors (NYSE:KORS)||$10.15 billion||+2.3%|
|TRW Automotive (NYSE:TRW)||$5.21 billion||+1.9%|
|Harman International Industries (NYSE:HAR)||$3.07 billion||+1.8%|
|LeapFrog Enterprises (NYSE:LF)||$739.6 million||-1.8%|
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Navistar (NYSE:NAV) has moved up 8.4% and is currently trading at $23.27 per share. The company's volume is currently 1.3 million shares for the day,. Volume is used to evaluate how meaningful the price movement of a stock is. 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. NAV has a low P/S ratio of 0.16. 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.
Dorman Products (Nasdaq:DORM) is at $29.89 per share after an increase of 3.7%. So far today, 59,788 shares have changed hands. This is one times its average volume over the past three months. 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 DORM is 3.1, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Whirlpool (NYSE:WHR) is up 2.7% to reach a current price of $76.30 per share. At 460,683 shares, the company's volume so far today is in line with the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 dividend yield is calculated by dividing a company's dividends per share by its stock price. WHR has a dividend yield of 2.7%. A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. SEE: Dividend Yield For The Downturn
After rising 2.3%, Michael Kors (NYSE:KORS) is currently trading at a share price of $53.76. So far today, 945,972 shares have changed hands. The trading volume for a stock indicates the level of investor interest. 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. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. KORS has a P/E ratio of 67.4, high compared to the industry average of 21.2. This could mean that the market is expecting big things over the next few months or years. 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: Profit With The Power Of Price-To-Earnings
Rising 1.9%, TRW Automotive (NYSE:TRW) is currently trading at $43.48 per share. At 262,767 shares, the company's volume so far today is lighter than yesterday's volume of 794,407 shares. Volume is an important indicator because it indicates how significant a price shift is. 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 debt ratio is calculated by dividing total liabilities by total assets. TRW's debt ratio of 69.1% is fairly high. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
After an increase of 1.8%, Harman International Industries (NYSE:HAR) has reached a current price of $46.49. This morning, the company is trading a volume of 102,468 shares. This is 0.2 times the average volume over the last three months. If a stock price moves on high volume, this means that the change is a significant one. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. A price/sales ratio is derived by dividing stock market price by company sales. HAR has a P/S ratio of 0.61, on the low end. Low P/S ratios are more attractive than high ratios because this indicates that an investor is paying less for each dollar of sales. 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.
Currently trading at $10.81 per share, LeapFrog Enterprises (NYSE:LF) has fallen 1.8%. So far today, the company's volume is 243,179 shares, 0.3 times the current daily average. Volume indicates the level of interest that investors have in a company at its current price. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. When used consistently and uniformly, the price/earnings to growth (PEG) ratio is an essential tool that adds dimension to the price/earnings ratio, allows comparisons across diverse industries and is always on the lookout for value. LF has a PEG ratio of 0.93, which is consistent 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.
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.