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Tickers in this Article: DCI, MKTAY, MTH, ESL, VMC, DXPE, TDG
The morning has been good for the market. The Nasdaq has climbed 0.5%; the S&P 500 has risen 0.3%; and the Dow is up 0.1%. 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.

Underperforming the market overall, the Capital Goods sector (XLI) is up 0.1%, and these are its current biggest movers:
CompanyMarket CapPercentage Change
Donaldson Company (NYSE:DCI)$5.2 billion+6.6%
Makita Corporation (Nasdaq:MKTAY)$5.07 billion-2.1%
Meritage (NYSE:MTH)$1.31 billion-1.8%
Esterline (NYSE:ESL)$1.63 billion-1.5%
Vulcan Materials (NYSE:VMC)$5.31 billion-1.4%
DXP Enterprises (Nasdaq:DXPE)$659 million-1.3%
TransDigm Group (NYSE:TDG)$7.13 billion+1%
Broker Summary: OptionsXpress Online Trading Platform

Donaldson Company (NYSE:DCI) has risen 6.6% to hit a current price of $37.19 per share. The company is currently trading a volume of 780,468 shares. This is 1.8 times its average volume over the past three months. 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. 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 price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. DCI has a PEG ratio of 1.68, which is consistent 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.

Makita Corporation (Nasdaq:MKTAY) has decreased to $36.57 per share, a 2.1% fall. So far today, the company's volume is 7,167 shares, 0.1 times the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. The P/B ratio for MKTAY is 1.3, indicating that the stock is trading for more than its book value. 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 value ratios are particularly useful to value investors, distressed or "vulture" investors, or any other investors purchasing beaten-down securities but are less useful to investors focused on growth stocks, purchasing IPOs, or investing in technology or other "asset-lite" companies. SEE: Using The Price-To-Book Ratio To Evaluate Companies

Meritage (NYSE:MTH) is down 1.8% to reach $36.34 per share. The company is currently trading a volume of 260,092 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. 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. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. MTH's P/S ratio of 1.17 is on the high side. 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.

Slipping 1.5%, Esterline (NYSE:ESL) is currently trading at $52.04 per share. So far today, 120,134 shares have changed hands,. 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. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. ESL has a debt ratio of 51.7%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

Vulcan Materials (NYSE:VMC) is trading at $40.50 per share, down 1.4%. The company's volume for the day so far is 129,152 shares. This is 0.3 times the average volume over the last three months. Volume is used to evaluate how meaningful the price movement of a stock is. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the 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. VMC has a D/E ratio of 75%. 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.

DXP Enterprises (Nasdaq:DXPE) has fallen 1.3% and is currently trading at $45.90 per share. So far today, the company's volume is 31,442 shares, in keeping with its current daily 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 capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. The capitalization ratio for DXPE is 49.5%. 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.

After an increase of 1%, TransDigm Group (NYSE:TDG) has reached a current price of $140. The company's volume for the day so far is 246,292 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. The P/E ratio for TDG is 24.7, above the industry average of 14.95. 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: Investment Valuation Ratios: Price/Earnings Ratio

The Bottom Line The nature of the market is such that stocks will have good days and bad days. 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.

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