Filed Under: ,
Tickers in this Article: WSO, USG, HXM, CBI, EXP, CNH, VMI
The Nasdaq has fallen 0.8%, the S&P 500 has decreased 0.2% and the Dow has risen 0.4% so far today. 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 biggest movers in the Capital Goods sector (XLI) (+0.1%) are:
CompanyMarket CapPercentage Change
Watsco Inc (NYSE:WSO)$2.6 billion-11.4%
USG Corporation (NYSE:USG)$2.04 billion-11.1%
Homex Development Corp. (ADR) (NYSE:HXM)$750 million-10.1%
Chicago Bridge & Iron Company N.V. (NYSE:CBI)$3.53 billion+7.5%
Eagle Materials, Inc. (NYSE:EXP)$1.7 billion-6.2%
CNH Global NV (ADR) (NYSE:CNH)$8.28 billion+5.2%
Valmont Industries, Inc. (NYSE:VMI)$3.44 billion-4.9%
Beginner's Guide To NinjaTrader Trading Software

Taking a 11.4% hit, Watsco (NYSE:WSO) is currently trading at $67 per share. The company's volume is currently 1.1 million shares for the day, 3.6 times the average volume over the last three months. Volume is an important indicator because it indicates how significant a price shift is. 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. WSO has a P/B ratio of 2.89 which shows that its share price is higher 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. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets. SEE: How Buybacks Warps The Price-To-Book Ratio

After a precipitous drop of 11.1%, USG (NYSE:USG) is now trading at a share price of $17.12. The company's volume for the day so far is 4.9 million shares. 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 allow the investor to make a quick determination as to a company's investment value. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. USG has a P/S ratio of 0.58, on the low end. The lower the P/S ratio, the more reasonably price the stock, all else being equal. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.

Homex Development Corp (NYSE:HXM) is at a share price of $12.07 after a sharp decline of 10.1%. At 819,842 shares, the company's volume so far today is 2.8 times the average daily volume. If a stock is trading on low volume, then there is not much interest in the stock. On the other hand, if a stock is trading on high volume, then there is a lot of interest in the stock. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. HXM's debt ratio of 69.4% is fairly high. This means that most of the company's assets are financed through debt. 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 7.5%, Chicago Bridge & Iron Company (NYSE:CBI) is currently trading at a share price of $39.13. The company is trading at a volume of 1.3 million shares. Yesterday's volume was only 1.2 million shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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 leverage ratio. The debt-equity ratio of 3% is relatively low. This shows that the company's assets are financed primarily through equity. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Eagle Materials (NYSE:EXP) is currently trading at a share price of $35.15, a 6.2% decline. So far today, the company's volume is 643,186 shares, 1.1 times the current three-month average. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. 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 EXP is 35.7%. 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.

CNH Global NV (NYSE:CNH) has risen 5.2% to hit a current price of $36.31 per share. So far today, the company's volume is 603,742 shares. Volume indicates the level of interest that investors have in a company at its current price. 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. 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. CNH's P/B ratio of 1.04 shows that its share price is higher than its book value. 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. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Valmont Industries (NYSE:VMI) has fallen 4.9% and is currently trading at $123.25 per share. At 263,426 shares, the company's volume so far today is 1.6 times the current daily average. 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. A company's value as an investment is more easily 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. VMI's P/E ratio of 13.5 falls below the industry average of 37.33. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. 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. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

comments powered by Disqus

Trading Center