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Tickers in this Article: VMC, TEX, LEN, COL, TOL, EXP, MLM
The morning has been good for the market. The Nasdaq has increased 0.1%; the S&P 500 has moved up 0.3%; and the Dow is trading up 0.4%. 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.

Outperforming the market overall, the Capital Goods sector (XLI) is up 0.5% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
Vulcan Materials (NYSE:VMC)$5.43 billion+4.5%
Terex (NYSE:TEX)$2.54 billion+4.2%
Lennar (NYSE:LEN)$6.26 billion+3.4%
Rockwell (NYSE:COL)$7.3 billion+2.7%
Toll Brothers, Inc (NYSE:TOL)$5.64 billion+2.7%
Eagle Materials (NYSE:EXP)$2.03 billion+2.7%
Martin Marietta Materials (NYSE:MLM)$3.86 billion+2.3%
Broker Summary: Fidelity Online Brokerage

Vulcan Materials (NYSE:VMC) is at $43.84 per share after an increase of 4.5%. So far today, the company's volume is 305,533 shares. This is on pace to reach yesterday's trading volume of 620,161 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The debt ratio is calculated by dividing total liabilities by total assets. VMC's debt ratio is 54.2%. 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.

After rising 4.2%, Terex (NYSE:TEX) is currently trading at a share price of $23.93. So far today, the company's volume is 1.5 million shares, consistent with its current daily average. 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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). PEG ratio for TEX is consistent with the industry average at 1.19. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

Lennar (NYSE:LEN) has risen 3.4% and is currently trading at $34.20 per share. The company is currently trading a volume of 2.1 million shares. A stock's volume conveys how excited investors are about it. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. LEN has a high P/S ratio of 1.51. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.

Rockwell (NYSE:COL) is currently trading at $52.78 per share, a 2.7% increase. So far today, the company's volume is 674,368 shares, 0.8 times the current three-month 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. 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. The debt-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. The D/E ratio for COL is 77%. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Increasing 2.7%, Toll Brothers, Inc (NYSE:TOL) is trading at $34.44 per share. The company's volume for the day so far is 1.1 million shares. This is on pace to reach yesterday's trading volume of 2.6 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. The capitalization ratio for TOL is 40.8%. 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.

Rising 2.7%, Eagle Materials (NYSE:EXP) is currently trading at $46.04 per share. So far today, the company's volume is 199,183 shares, 0.7 times its current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 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. EXP's P/B ratio of 4.32 shows that its share price is higher 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

Martin Marietta Materials (NYSE:MLM) has increased to a share price of $86.02, a 2.3% rise. So far today, the company's volume is 151,607 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. MLM has a low dividend yield of 1.9%. If you are an income investor, this stock may not be attractive to you. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Guide To Stock-Picking Strategies: Income Investing

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. 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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