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Tickers in this Article: NRG, AT, ETP, ETE, DPM, EPD, WES
The market has been doing well after the morning's trading. The Nasdaq has moved up 0.7%; the S&P 500 has risen 0.7%; and the Dow is trading up 0.6%. 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.

Outperforming the market overall, the Utilities sector (XLU) is up 1% and its biggest movers so far today are:
CompanyMarket CapPercentage Change
NRG Energy (NYSE:NRG).55 billion+5.2%
Atlantic Power Corp (NYSE:AT).51 billion-4.7%
Energy Transfer Partners LP (NYSE:ETP).18 billion+3.2%
Energy Transfer Equity, L.P. (NYSE:ETE).88 billion+2.6%
DCP Midstream Partners, LP (NYSE:DPM) billion+2.4%
Enterprise Products Partners L.P. (NYSE:EPD).14 billion+2%
Western Gas Partners, LP (NYSE:WES).86 billion+1.5%
Software Summary: Finviz.com Stock Screener

NRG (NYSE:NRG) has moved up 5.2% and is currently trading at $16.42 per share. With 1.3 million shares changing hands so far today, the company's volume is 0.3 times its average over the past three months. 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. Margin ratios highlight companies that are worth further examination. NRG has a low gross profit margin of 24.3%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. 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 of 2.8% is low relative to its gross profit margin. A company with a low or negative net profit margin can potentially increase its profitability by taking steps to reduce costs and increase sales.

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 price/earnings to growth (PEG) ratio compares a company's P/E ratio to its earnings-per-share growth rate, which tells you whether or not you are a good value when purchasing a stock with a high price/earnings ratio (P/E ratio). NRG's PEG ratio is 3.21. 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.

Slipping 4.7%, Atlantic (NYSE:AT) is currently trading at $12.66 per share. The company's volume for the day so far is 3.9 million 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. Margin analysis is a great way to understand the profitability of companies. AT's gross profit margin is 45.8%. Net profit margin is calculated by dividing net income by sales; the higher the net profit margin, the better. The company's net profit margin is negative. This shows that the company reported a net loss in the most recent quarter.

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/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. AT's P/S ratio of 3.94 is on the high side. This could be a good sign if the share price increases. 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.

Increasing 3.2%, Energy Transfer (NYSE:ETP) is trading at $45.73 per share. At 724,579 shares, the company's volume so far today is 0.7 times the average daily volume. The trading volume for a stock indicates the level of investor interest. 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 ETP is 27.8%. ETP has an operating profit margin of 19.4% and a net profit margin of 23.8%, both low compared to its gross profit margin.

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. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. ETP's debt ratio of 61.3% is fairly high. This means that most of the company's assets are financed through debt. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.

After rising 2.6%, Energy Transfer Equity (NYSE:ETE) is currently trading at a share price of $39.86. So far today, 263,353 shares of the company's stock have changed hands. This is less trading activity than there was yesterday. Volume is used to evaluate how meaningful the price movement of a stock is. 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. ETE has a gross profit margin of 26.2%. Relative to its gross profit margin, ETE's operating profit margin of 10.8% and net profit margin of 6.2% are low.

Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. The dividend yield is calculated by dividing a company's dividends per share by its stock price. Dividend yield for ETE is 6.4%. To calculate the dividend yield, divide the level of dividends by the stock price; the higher the yield, the more attractive the security. SEE: Guide To Stock-Picking Strategies: Income Investing

DCP Midstream (NYSE:DPM) has risen 2.4% and is currently trading at $39.34 per share. The company's volume for the day so far is 31,893 share, 0.4 times the average volume over the last three months. 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. DPM has a low gross profit margin of 15.5%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. DPM's operating margin of 5.9% and net margin of 7.9% are low relative to its gross margin.

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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. DPM's capitalization ratio is 45.8%. A low level of debt and a healthy proportion of equity in a company's capital structure is an indication of financial fitness.

Increasing 2%, Enterprise Products Partners (NYSE:EPD) is trading at $49.55 per share. The company is currently trading a volume of 224,471 shares. Volume indicates the level of interest that investors have in a company at its current price. 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. EPD has a low gross profit margin of 9.2%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Compared with its gross profit margin, EPD's operating profit margin of 6.7% and net profit margin of 5% are low.

Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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. EPD's D/E ratio of 119% is on the high side. This shows that the company's assets are financed primarily through debt. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.

Western Gas (NYSE:WES) has increased to a share price of $43.10, a 1.5% rise. So far today, the company's volume is 124,764 shares, 0.1 times its current daily average. If a stock price moves on high volume, this means that the change is a significant one. Margin analysis is a great way to understand the profitability of companies. WES' gross profit margin is 46.6%. The operating margin ratio can vary widely across industries, so investors should focus on comparing companies from similar industries or with similar business models. WES has an operating profit margin of 27.3%, which is low relative to its gross profit margin. 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 profit margin is 21%.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). WES' P/E ratio of 25.6 is above the industry average of 22.02. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Investment Valuation Ratios: Price/Earnings Ratio

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.

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