The market is having a good day so far: the Nasdaq has moved up 0.2%; the S&P 500 has risen 0.5%; and the Dow has increased 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 up 0.8%, outperforming the market overall. The biggest movers in the sector so far are:
|Company||Market Cap||Percentage Change|
|Dunkin\' Brands Group (Nasdaq:DNKN)||$3.14 billion||+3.8%|
|Select (Nasdaq:SCSS)||$1.83 billion||+3.4%|
|Mohawk Industries (NYSE:MHK)||$5.55 billion||+2.5%|
|Whirlpool (NYSE:WHR)||$6.59 billion||+2.3%|
|Jarden (NYSE:JAH)||$4.32 billion||+2.3%|
|Michael Kors (NYSE:KORS)||$10.32 billion||+1.8%|
|Oxford Industries (NYSE:OXM)||$949.3 million||+1.8%|
Broker Summary: Charles Schwab Online Brokerage
Dunkin' Brands Group (Nasdaq:DNKN) is currently trading at $30.95 per share, a 3.8% increase. So far today, the company's volume is 2.1 million shares. 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. 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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. DNKN's D/E ratio of 193% is on the high side. Companies with high D/E ratios may have difficulty attracting additional investment capital. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Select (Nasdaq:SCSS) is up 3.4% to reach a current price of $33.60 per share. The company's volume is currently 228,280 shares for the day, on pace to reach yesterday's volume of 454,330 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for SCSS is 11.2, indicating that the stock is trading for more 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. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Using The Price-To-Book Ratio To Evaluate Companies
After an increase of 2.5%, Mohawk Industries (NYSE:MHK) has reached a current price of $82.50. The company's volume for the morning is 215,262 shares. This is 0.3 times the average daily volume. 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. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. P/E ratio for MHK is 27.4. 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: Investment Valuation Ratios: Price/Earnings Ratio
Increasing 2.3%, Whirlpool (NYSE:WHR) is trading at $86.96 per share. So far today, the company's volume is 412,162 shares, consistent with its average over the last three months. If a stock price moves on high volume, this means that the change is a significant one. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. Dividend yield measures the income that a stock will generate for an investor. WHR's dividend yield is 2.4%. 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: Guide To Stock-Picking Strategies: Income Investing
Jarden (NYSE:JAH) is at $55.38 per share after an increase of 2.3%. So far today, 331,619 shares have changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. JAH's P/S ratio of 0.5 is fairly low. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. 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.
Michael Kors (NYSE:KORS) has risen 1.8% and is currently trading at $54.41 per share. So far today, the company's volume is 1.6 million shares,. A stock's volume conveys how excited investors are about it. 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. The debt ratio for KORS is a low 32%. In other words, the company is less sensitive to changes in business or interest rates since less of its cash flow is dedicated to paying off loan expenses. 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.
Rising 1.8%, Oxford Industries (NYSE:OXM) is currently trading at $58.29 per share. This morning, the company's volume is 40,230 shares. This is 0.3 times its current daily 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. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. OXM has a low debt-equity ratio of 45%. Companies with low D/E ratios are more attractive to investors because they are better able to protect their business interests in times of decline. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. 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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