The market is currently up, with the Nasdaq rising 1%, the S&P 500 increasing 1.3% and the Dow moving up 1.3%. The utilities sector is a category of stocks for utilities such as gas and power. It contains companies such as electric, gas and water firms and integrated providers. Because utilities require significant infrastructure, these firms often carry large amounts of debt. With a high debt load, utilities companies become sensitive to changes in the interest rate. As interest rates rise or drop, the debt payments will increase or decrease. The utilities sector performs best when interest rates are falling or remain low.
Underperforming the market overall, the Utilities sector (XLU) is up 0.7%, and these are its current biggest movers:
|Company||Market Cap||Percentage Change|
|ITC Holdings Corp. (NYSE:ITC)||$3.7 billion||+3.9%|
|National Fuel Gas Co. (NYSE:NFG)||$3.85 billion||+2.2%|
|Kinder Morgan Inc (NYSE:KMI)||$26.78 billion||+2.2%|
|Northeast Utilities (NYSE:NU)||$12.26 billion||+2.1%|
|Targa Resources Corp (NYSE:TRGP)||$1.83 billion||+1.8%|
|Alliant Energy Corporation (NYSE:LNT)||$5.08 billion||+1.7%|
|Pinnacle West (NYSE:PNW)||$5.72 billion||+1.6%|
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Rising 3.9%, ITC (NYSE:ITC) is currently trading at $74.95 per share. So far today, the company's volume is 498,125 shares, 1.4 times its current daily average. Volume is an important indicator because it indicates how significant a price shift is. Profit-margin ratios can give investors deeper insight into management efficiency than earnings alone can provide. Gross profit margin, operating profit margin and net margin are commonly used margins. ITC has a gross profit margin of 83%, which is on the high end. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. The company has a net profit margin of 22.7%, high compared to its gross profit margin. A high net profit margin means a company is able to control its costs that buy goods and services at prices significantly higher than it costs to produce or provide them.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. ITC has a D/E ratio of 218%, which is relatively high. This shows that the company's assets are financed primarily through debt. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Increasing 2.2%, National Fuel (NYSE:NFG) is trading at $47.35 per share. The company is currently trading a volume of 142,816 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. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. NFG has a gross profit margin of 45.3%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 12.9%.
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 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. NFG has a capitalization ratio of 36.9%. 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.
Kinder Morgan (NYSE:KMI) is at $34.08 per share after an increase of 2.2%. At 1.6 million shares, the company's volume so far today is 0.4 times its current three-month average. A stock's volume conveys how excited investors are about it. Calculating the profit margin is a great way to gain insight into aspects of how well a company generates and retains money. Instead of measuring how much managers earn from assets, equity or invested capital, profit-margin ratios measure how far a company stretches its total revenue or total sales. KMI's gross profit margin is 42%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). Relative to its gross profit margin, KMI's operating margin of 27.8% is on the low side. Net profit margin compares net income with sales. The company has a net profit margin of 4.8%.
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 dividend yield is calculated by dividing a company's dividends per share by its stock price. KMI has a dividend yield of 3.8%. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Dividend Yield For The Downturn
After rising 2.1%, Northeast Utilities (NYSE:NU) is currently trading at a share price of $39.90. So far today, 553,855 shares of the company's stock have changed hands. Trading activity is down from yesterday when 1.1 million shares changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. Margin ratios highlight companies that are worth further examination. NU has a gross profit margin of 35%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. The company's net profit margin is 8.8%.
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. Using price/earnings ratios (P/E ratios) does not give an indication of whether or not an individual company's ratio is reasonable, a shortcoming that can be corrected by using the price/earnings to growth ratio (PEG ratio). PEG ratio for NU is 2.5. 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.
Targa (NYSE:TRGP) is up 1.8% to reach a current price of $43.83 per share. So far today, the company's volume is 46,488 shares, 0.2 times the average daily volume. If a stock price moves on high volume, this means that the change is a significant one. Profit-margin ratios measure how much money a company squeezes from its total revenue or total sales. Investors can look at a company's gross profit margin, operating profit margin and net margin to understand a company's profitability. TRGP has a low gross profit margin of 10.1%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. The company's net margin is 0.5%, which is low compared to its gross margin. Investors in companies with low profit margins need to be concerned that if sales drop, profits will fall sharply as well.
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. 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. TRGP has a P/B ratio of 13.24 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. P/B value comparisons should be made among companies in the same industry rather than across industries. SEE: How Buybacks Warps The Price-To-Book Ratio
Alliant (NYSE:LNT) is currently trading at $46.52 per share, a 1.7% increase. So far today, the company's volume is 173,603 shares. In technical analysis, trading volume is used to determine the strength of a market indicator. There are many tools investors can use to evaluate a stock, including margins. Margins, quite simply, are earnings expressed as a ratio, or a percentage of sales, and this allows investors to compare the profitability of different companies, while net earnings, which are presented as an absolute number, cannot. The gross profit margin for LNT is 25.1%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company's net profit margin of 8.1% is low relative to its gross profit margin. This is potentially worrying, as companies with low profit margins are vulnerable to poor market conditions.
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. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). The P/E ratio for LNT is 19.1, above the industry average of 12.46. This could mean that the market is expecting big things over the next few months or years. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio
After an increase of 1.6%, Pinnacle (NYSE:PNW) has reached a current price of $53.02. The company's volume is currently 132,531 shares for the day, 0.2 times the average volume over the last three months. The trading volume for a stock indicates the level of investor interest. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. PNW's gross profit margin is 43.6%. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. Net margin is 11.7%.
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. The P/S ratio for PNW is 1.63, which is relatively high. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. Daily stock performance should be weighed against historical performance and put in context of the market overall. Keep in mind that all these ratios should be compared against historical numbers and industry information in order to get a more complete picture.