On a bad day for the market, the Nasdaq has decreased 1%, the S&P 500 is down 0.5% and the Dow has fallen 0.2%. 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 currently ahead of the overall market, down only 0.7%, and its biggest movers are currently:
|Company||Market Cap||Percentage Change|
|Select (Nasdaq:SCSS)||$1.77 billion||-4.3%|
|Tempur-Pedic International (NYSE:TPX)||$1.64 billion||-4.3%|
|Deckers (Nasdaq:DECK)||$1.3 billion||+3.8%|
|Harman International Industries (NYSE:HAR)||$3.15 billion||-3.2%|
|Mohawk Industries (NYSE:MHK)||$5.55 billion||-2.4%|
|Whirlpool (NYSE:WHR)||$6.46 billion||-2.4%|
|Toyota Motor Corporation (NYSE:TM)||$127.43 billion||-2.3%|
Forex Broker Summary: Forex Capital Markets (FXCM)
Falling 4.3%, Select (Nasdaq:SCSS) is currently at a share price of $30.14. The company's volume is currently 404,765 shares. The trading volume for a stock indicates the level of investor interest. A wide array of ratios can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. SCSS has a debt ratio of 42.2%, which is fairly low. 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. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
At $26.39, Tempur-Pedic International (NYSE:TPX) has slipped 4.3%. The company's volume is currently 589,688 shares for the day, consistent with its current daily average. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/earnings to growth (PEG) ratio is calculated by dividing the price/earnings ratio by growth in earnings-per-share; the lower the PEG ratio, the more reasonably valued the security. TPX's PEG ratio of 0.81 is in line 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.
Deckers (Nasdaq:DECK) has risen 3.8% and is currently trading at $36.32 per share. The company is currently trading a volume of 1.4 million shares. In technical analysis, trading volume is used to determine the strength of a market indicator. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. The P/B ratio for DECK is 1.87, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. 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: Investment Valuation Ratios: Price/Book Value Ratio
After a decline of 3.2%, Harman International Industries (NYSE:HAR) has hit a share price of $45.40. With 273,873 shares changing hands so far today, the company's volume is consistent with its current three-month 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. Investment valuation ratios can be very useful in determining the value of a stock, but it is very important to keep in mind that while some financial ratios have general rules (or a broad application), in most instances it is a prudent practice to look at a company's historical performance and use peer company/industry comparisons to put any given company's ratio in perspective. Dividend yield measures the income that a stock will generate for an investor. HAR has a dividend yield of 1.3%, which is fairly low. This could indicate that that the stock is overpriced or that future dividends might be higher. For income-oriented investors such as retirees, a stock with a high dividend yield may be more attractive than a stock with a low dividend yield. SEE: Guide To Stock-Picking Strategies: Income Investing
Mohawk Industries (NYSE:MHK) is down 2.4% to reach $78.41 per share. The company is trading at a volume of 154,597 shares. This is on pace to fall short of yesterday's volume of 608,551 shares. 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. 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 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. The P/S ratio for MHK is 0.85, which is relatively low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. 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.
Whirlpool (NYSE:WHR) is trading at $81.37 per share, down 2.4%. At 523,449 shares, the company's volume so far today is in line with the current daily average. High volume indicates a lot of investor interest while low volume indicates the opposite. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). WHR's P/E ratio of 11.4 is consistent with the industry average. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Profit With The Power Of Price-To-Earnings
Toyota Motor Corporation (NYSE:TM) has decreased to $78.65 per share, a 2.3% fall. The company's volume for the day so far is 182,935 shares. Volume is used to evaluate how meaningful the price movement of a stock is. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. 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. TM has a D/E ratio of 112%, which is relatively high. This shows that the company's assets are financed primarily through debt. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage.
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. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.