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TransDigm Group and Other Big Movers In Capital Goods on September 21, 2012
The Nasdaq has remained steady, the S&P 500 has slipped 0.3% and the Dow is unchanged after the morning's trading. 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.
On a quiet day for the market overall so far, the Capital Goods sector (XLI) has slipped 0.6% and its biggest movers are currently:
Forex Broker Summary: Forex Capital Markets (FXCM)
KB Home (NYSE:KBH) has moved up 8.6% and is currently trading at $14.24 per share. This morning, the company is trading a volume of 10.5 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. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. KBH's stock is trading for more than its book value with a P/B ratio of 2.97. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. 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: How Buybacks Warps The Price-To-Book Ratio
USG (NYSE:USG) is at $23.96 per share after an increase of 3.6%. At 1.1 million shares, the company's volume so far today is 0.4 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt ratio is calculated by dividing total liabilities by total assets. USG's debt ratio of 96.8% is fairly high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. 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.
Meritage (NYSE:MTH) has increased to a share price of $41.52, a 3.1% rise. So far today, 369,182 shares of the company's stock have changed hands. This is on pace to reach yesterday's trading volume of 703,730 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. 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. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for MTH is 1.17, which is relatively high. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
After an increase of 2.6%, AMCOL (NYSE:ACO) has reached a current price of $35.57. At 84,391 shares, the company's volume so far today is 0.8 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. ACO has a capitalization ratio of 37.3%. 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.
Increasing 2.5%, M.D.C. Holdings (NYSE:MDC) is trading at $40.59 per share. The company is currently trading a volume of 514,609 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 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. The debt-equity (D/E) ratio is a leverage ratio. MDC has a D/E ratio of 89%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
After rising 2.4%, TransDigm Group (NYSE:TDG) is currently trading at a share price of $145.51. With 75,533 shares changing hands so far today, the company's volume is 0.3 times its 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. TDG's PEG ratio is 1.19. 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.
National Presto Industries (NYSE:NPK) has risen 2.4% and is currently trading at $74.48 per share. The company's volume is currently 13,059 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. NPK's P/B ratio of 1.63 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: Using The Price-To-Book Ratio To Evaluate Companies
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
On a quiet day for the market overall so far, the Capital Goods sector (XLI) has slipped 0.6% and its biggest movers are currently:
| Company | Market Cap | Percentage Change |
| KB Home (NYSE:KBH) | $979.4 million | +8.6% |
| USG (NYSE:USG) | $2.44 billion | +3.6% |
| Meritage (NYSE:MTH) | $1.37 billion | +3.1% |
| AMCOL (NYSE:ACO) | $1.14 billion | +2.6% |
| M.D.C. Holdings (NYSE:MDC) | $1.81 billion | +2.5% |
| TransDigm Group (NYSE:TDG) | $7.34 billion | +2.4% |
| National Presto Industries (NYSE:NPK) | $502.1 million | +2.4% |
KB Home (NYSE:KBH) has moved up 8.6% and is currently trading at $14.24 per share. This morning, the company is trading a volume of 10.5 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. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. KBH's stock is trading for more than its book value with a P/B ratio of 2.97. This implies that investors expect management to create more value from a given set of assets and/or that the market value of the firm's assets is significantly higher than their accounting value. 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: How Buybacks Warps The Price-To-Book Ratio
USG (NYSE:USG) is at $23.96 per share after an increase of 3.6%. At 1.1 million shares, the company's volume so far today is 0.4 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt ratio is calculated by dividing total liabilities by total assets. USG's debt ratio of 96.8% is fairly high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. 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.
Meritage (NYSE:MTH) has increased to a share price of $41.52, a 3.1% rise. So far today, 369,182 shares of the company's stock have changed hands. This is on pace to reach yesterday's trading volume of 703,730 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. 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. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for MTH is 1.17, which is relatively high. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
Increasing 2.5%, M.D.C. Holdings (NYSE:MDC) is trading at $40.59 per share. The company is currently trading a volume of 514,609 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 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. The debt-equity (D/E) ratio is a leverage ratio. MDC has a D/E ratio of 89%. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
After rising 2.4%, TransDigm Group (NYSE:TDG) is currently trading at a share price of $145.51. With 75,533 shares changing hands so far today, the company's volume is 0.3 times its 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The assumption with high price/earnings stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential, and the price/earnings to growth (PEG) ratio helps investors determine the degree of reliability of that growth assumption. TDG's PEG ratio is 1.19. 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.
National Presto Industries (NYSE:NPK) has risen 2.4% and is currently trading at $74.48 per share. The company's volume is currently 13,059 shares. If a stock price makes a big move up or down, volume lets us know the significance of that move. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The price/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. NPK's P/B ratio of 1.63 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: Using The Price-To-Book Ratio To Evaluate Companies
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.
by
Investopedia Staff
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