TransDigm Group and Other Big Movers In Capital Goods on October 4, 2012

By Investopedia Staff | October 04, 2012 AAA

The Nasdaq has moved little, the S&P 500 has climbed 0.4% and the Dow is up 0.5% 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 Capital Goods sector (XLI) has increased 0.2% overall, and these are the biggest movers in the sector so far:

Company Market Cap Percentage Change
Thor Industries (NYSE:THO) $1.88 billion +4.6%
James Hardie Industries SE (NYSE:JHX) $3.99 billion +4%
MI Developments Inc (NYSE:GRP) $1.66 billion +2.2%
Vulcan Materials (NYSE:VMC) $6.1 billion +2.2%
DXP Enterprises (Nasdaq:DXPE) $669.9 million -2%
Chart Industries (Nasdaq:GTLS) $2.12 billion +1.9%
TransDigm Group (NYSE:TDG) $7.48 billion +1.8%

Broker Summary: TD Ameritrade Thinkorswim

Thor Industries (NYSE:THO) is up 4.6% to reach a current price of $37.18 per share. So far today, 332,350 shares of the company's stock have changed hands. This is on pace to reach yesterday's trading volume of 648,619 shares. 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. 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/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. THO's PEG ratio of 1.31 is in line with the industry average. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.

James Hardie Industries SE (NYSE:JHX) is at $47.46 per share after an increase of 4%. The company's volume is currently 1,918 shares for the day, 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The dividend yield is calculated by dividing a company's dividends per share by its stock price. JHX has a high dividend yield of 8.3%. Companies with large dividends tend to cut them to preserve cash flow, so watch out that you don't end up with a stock that might not be worth owning. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Dividend Yield For The Downturn

MI Developments Inc (NYSE:GRP) has risen 2.2% and is currently trading at $36.29 per share. So far today, the company's volume is 54,790 shares. Volume is an important indicator because it indicates how significant a price shift is. 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. A price/sales ratio is derived by dividing stock market price by company sales. GRP has a high P/S ratio of 8.72. This could be a good sign if the share price increases. 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.

Increasing 2.2%, Vulcan Materials (NYSE:VMC) is trading at $48.19 per share. With 196,843 shares changing hands so far today, the company's volume is 0.3 times its current three-month average. Volume indicates the level of interest that investors have in a company at its current price. 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 ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. VMC has a debt ratio of 54.2%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After a decline of 2%, DXP Enterprises (Nasdaq:DXPE) has hit a share price of $46.34. The company's volume is currently 28,499 shares. This is on pace to fall short of yesterday's volume of 149,090 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. Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. The D/E ratio for DXPE is 100%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.

Chart Industries (Nasdaq:GTLS) has risen 1.9% to hit a current price of $72.36 per share. So far today, the company's volume is 127,170 shares, 0.3 times the average daily volume. A stock's volume conveys how excited investors are about it. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. 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. GTLS has a P/B ratio of 3.33 which shows that its share price is higher 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: Using The Price-To-Book Ratio To Evaluate Companies

TransDigm Group (NYSE:TDG) has increased to a share price of $147.87, a 1.8% rise. So far today, 253,910 shares have changed hands. Volume is used to evaluate how meaningful the price movement of a stock 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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). TDG's P/E ratio of 25.9 is above the industry average of 14.73. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. 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?

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Paying close attention to the previous ratios will help you identify key times to adjust your strategy. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.

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