The Nasdaq is up 0.1%, the S&P 500 has moved little and the Dow has climbed 0.1% after the morning's trading. 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.
These are the biggest movers in the Consumer Cyclical sector (XLY) (+0.4%):
|Company||Market Cap||Percentage Change|
|HNI (NYSE:HNI)||$1.39 billion||-13.7%|
|Deckers (Nasdaq:DECK)||$1.78 billion||-7.7%|
|Tesla Motors (Nasdaq:TSLA)||$3.43 billion||-4.9%|
|Polaris Industries (NYSE:PII)||$5.82 billion||-4.7%|
|Arctic Cat (Nasdaq:ACAT)||$575.9 million||-3.3%|
|Warnaco Group (NYSE:WRC)||$2.19 billion||-3.1%|
|Shutterfly (Nasdaq:SFLY)||$1.19 billion||+2.9%|
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HNI (NYSE:HNI) is at a share price of $26.50 after a sharp decline of 13.7%. So far today, 568,974 shares have changed hands, whereas yesterday, volume was only 182,729 shares. Volume is an important indicator because it indicates how significant a price shift is. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. HNI has a low P/S ratio of 0.6. The lower the P/S ratio, the more reasonably price the stock, all else being equal. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
At $44.27, Deckers (Nasdaq:DECK) has slipped 7.7%. So far today, the company's volume is 1.5 million shares. This is 0.9 times the average volume over the last three months. The trading volume for a stock indicates the level of investor interest. 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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. Relative to the industry P/E ratio of 29.82, DECK's 10.8 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: Can Investors Trust the P/E Ratio?
Currently trading at $30.95 per share, Tesla Motors (Nasdaq:TSLA) has fallen 4.9%. So far today, the company's volume is one million shares, 0.8 times the 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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. TSLA has a high D/E ratio of 706%. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Polaris Industries (NYSE:PII) is trading at $81 per share, down 4.7%. So far today, the company's volume is 723,765 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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 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. The capitalizion ratio of 14.9% 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. The capitalization ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company's total capital base, which is the capital raised by shareholders and lenders.
Arctic Cat (Nasdaq:ACAT) is currently trading at a share price of $42.36, a 3.3% decline. This morning, 61,063 shares have been traded,. Volume is used to evaluate how meaningful the price movement of a stock is. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are getting a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). ACAT has a PEG ratio of 1.0, which is consistent with the industry average. While P/E ratios are important indicators of market value, a high P/E in and of itself is not bad because it may indicate a company whose earnings are growing very rapidly, so many investors look at the PEG ratio in order to get an idea of whether or not a particular P/E ratio is justified by underlying earnings growth.
Currently trading at $51.91 per share, Warnaco Group (NYSE:WRC) has fallen 3.1%. This morning, the company is trading a volume of 144,284 shares. This is 0.3 times the current three-month average. In technical analysis, trading volume is used to determine the strength of a market indicator. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. WRC's stock is trading for more than its book value with a P/B ratio of 2.21. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. 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: Investment Valuation Ratios: Price/Book Value Ratio
Shutterfly (Nasdaq:SFLY) is up 2.9% to reach a current price of $34.01 per share. So far today, the company's volume is 349,542 shares, 0.4 times its current daily average. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for SFLY is 2.08, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.