It's been a bad day for the market after the morning's trading. The Nasdaq has declined 1.3%; the S&P 500 has slipped 0.8%; and the Dow has fallen 0.5%. 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.
The Utilities sector (XLU) has risen 0.1% despite little change in the market overall. Currently, the biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|American States Water Co (NYSE:AWR)||$783 million||-2.3%|
|National Fuel Gas Co. (NYSE:NFG)||$3.87 billion||-1.8%|
|Companhia de Saneamento Basico (ADR) (NYSE:SBS)||$8.56 billion||-1.4%|
|Piedmont Natural Gas Company, Inc. (NYSE:PNY)||$2.35 billion||-1.3%|
|Oneok (NYSE:OKE)||$8.8 billion||+1.2%|
|Williams Partners L.P. (NYSE:WPZ)||$16.59 billion||-1.1%|
|Markwest Energy Partners LP (NYSE:MWE)||$6.3 billion||-1.1%|
Broker Summary: Fidelity Online Brokerage
American States (NYSE:AWR) is down 2.3% to reach $40.55 per share. So far today, the company's volume is 56,487 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift 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. AWR has a gross profit margin of 58.3%. 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 has a net profit margin of 11.2%.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The dividend yield is calculated by dividing a company's dividends per share by its stock price. Dividend yield for AWR is 2.7%. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Guide To Stock-Picking Strategies: Income Investing
At $45.69, National Fuel (NYSE:NFG) has slipped 1.8%. At 81,836 shares, the company's volume so far today is 0.2 times its current three-month average. 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. 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. NFG's gross profit margin is 45.3%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net margin is 12.9%.
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 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). NFG's PEG ratio is -16.55. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Companhia de Saneamento Basico (NYSE:SBS) is trading at $74.07 per share, down 1.4%. So far today, the company's volume is 51,463 shares. Yesterday, 135,100 shares changed hands. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Margin analysis is a great way to understand the profitability of companies. SBS has a gross profit margin of 39%. Operating margin for SBS is 27.5% and net margin is 15.5%, both low relative to its gross margin.
Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. 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. SBS' P/B ratio of 1.39 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. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Piedmont Natural Gas Company (NYSE:PNY) is currently trading at a share price of $32.27, a 1.3% decline. So far today, the company's volume is 73,754 shares, 0.2 times the average daily volume. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. The gross profit margin for PNY is 28.5%. Net profit margin is calculated by dividing net income by sales. Relative to its gross profit margin, the company has a low net profit margin of 9.2%. This is a potential cause for concern, as companies with low profit margins can get wiped out in a downturn.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. Compared to the industry average of 15.88, PNY's P/E ratio of 21.7 is quite high. Usually, if a stock has a high P/E ratio, it indicates that the market expects the company to grow earnings quickly in the future. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: How To Find P/E And PEG Ratios
After an increase of 1.2%, Oneok (NYSE:OKE) has reached a current price of $42.83. This morning, the company is trading a volume of 327,558 shares. Volume is used to evaluate how meaningful the price movement of a stock is. 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. OKE has a low gross profit margin of 13.2%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. OKE's operating margin of 9.5% and net margin of 6% are low relative to its gross margin.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. OKE has a P/S ratio of 0.59, on the low end. A company with a lower P/S ratio is generally considered more attractive, since investors are paying less for each dollar of sales. It is important to compare P/S ratios for companies in the same industry, as ratios can vary quite widely for companies in different industries.
Slipping 1.1%, Williams Partners (NYSE:WPZ) is currently trading at $51.93 per share. The company's volume for the day so far is 111,408 share, 0.2 times the average volume over the last three months. 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. WPZ's gross profit margin is 36.7%. Compared with its gross profit margin, WPZ's operating profit margin of 25% and net profit margin of 20.8% are low.
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 ratio shows the proportion of assets that a company is financing through debt. WPZ's debt ratio is 59.5%. 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.
Markwest Energy (NYSE:MWE) has fallen 1.1% and is currently trading at $50.86 per share. So far today, 66,023 shares of the company's stock have changed hands. This is less trading activity than there was yesterday. 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. MWE has a gross profit margin of 54.6%. Operating profit measures how much cash the business throws off, and some consider it a more reliable measure of profitability since it is harder to manipulate with accounting tricks than net earnings. Operating profit margin for MWE is 14.7%. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. Net profit margin for the company is 10.5%.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. The D/E ratio for MWE is 100%. 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.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. It is important to weigh current activity against historical performance when making any investment decisions. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
Stock AnalysisThe fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
Personal FinanceWhat does an equity research analyst do on an everyday basis?
Mutual Funds & ETFsFind out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
Mutual Funds & ETFsLearn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
Mutual Funds & ETFsFind out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
Mutual Funds & ETFsLearn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
Stock AnalysisMillionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
ProfessionalsThe market has corrected...now what? Here's what you should consider rather than panicking.
Mutual Funds & ETFsTake an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
Mutual Funds & ETFsTake an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
The value of an asset less the value of all liabilities on that ...
An alternative investment theory to Efficient Market Hypothesis ...
An asset that is extremely difficult to dispose of either due ...
When an investor has essentially risked all of his capital for ...
An acronym for Perseroan Terbatas, which is Limited Liability ...
An abbreviation of "limited," Ltd. is a suffix that ...
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>