The market is having a bad day so far: the Nasdaq has slipped 0.4%; the S&P 500 is trading down 0.8%; and the Dow is down 0.8%. 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) is down 1%, underperforming the market overall. The current biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Ormat Technologies, Inc. (NYSE:ORA)||$800 million||+14.5%|
|Boardwalk Pipeline Partners, LP (NYSE:BWP)||$6 billion||-5.6%|
|Markwest Energy Partners LP (NYSE:MWE)||$6.56 billion||-4.6%|
|Energy Transfer Partners LP (NYSE:ETP)||$11.24 billion||-3.6%|
|Spectra Energy (NYSE:SE)||$19.94 billion||-3.3%|
|Energy Transfer Equity, L.P. (NYSE:ETE)||$12.02 billion||-3.1%|
|Oneok Partners LP (NYSE:OKS)||$12.81 billion||-2.2%|
Broker Summary: TD Ameritrade Thinkorswim
After a big jump of 14.5%, Ormat Technologies (NYSE:ORA) is trading at $20.16 per share. This morning, 117,223 shares have been traded, with trading activity in keeping with yesterday's. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. ORA's stock is trading for more than its book value with a P/B ratio of 1.01. 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. 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: How Buybacks Warps The Price-To-Book Ratio
Slipping 5.6%, Boardwalk Pipeline (NYSE:BWP) is currently trading at $27.25 per share. So far today, the company's volume is 5.4 million shares. This is 16.5 times the average volume over the last three months. Volume is an important indicator because it indicates how significant a price shift is. 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. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. BWP's P/E ratio of 26.3 is above the industry average of 23.88. 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. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: How To Find P/E And PEG Ratios
Markwest Energy (NYSE:MWE) has fallen 4.6% and is currently trading at $50.98 per share. The company's volume for the day so far is 208,734 shares. 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. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. MWE's PEG ratio is 4.76. 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.
Energy Transfer (NYSE:ETP) has fallen 3.6% and is currently trading at $44.14 per share. At 624,391 shares, the company's volume so far today is in line with the current daily average. If a stock price moves on high volume, this means that the change is a significant one. Valuation ratios allow the investor to make a quick determination as to a company's investment value. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. ETP has a dividend yield of 7.8%. 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: Guide To Stock-Picking Strategies: Income Investing
Spectra (NYSE:SE) is down 3.3% to reach $29.53 per share. So far today, 1.9 million shares of the company's stock have changed hands. This is on pace to fall short of yesterday's volume of 7.4 million 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. A price/sales ratio is derived by dividing stock market price by company sales. The P/S ratio for SE is 3.9, 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. A limitation of the P/S ratio is that the price component measures only stock market captialization, while sales are a function of the entire capital structure, potentially leading to wide differences between levered and unlevered companies.
Energy Transfer Equity (NYSE:ETE) is trading at $41.60 per share, down 3.1%. The company's volume for the day so far is 113,006 shares, 0.3 times the average volume over the last three months. A stock's volume conveys how excited investors are about it. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The easy-to-calculate debt ratio is helpful to investors looking for a quick take on the leverage for a company. ETE has a debt ratio of 92.6%, which is on the high side. As such, the company is highly leveraged and not highly liquid. 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.
Falling 2.2%, Oneok (NYSE:OKS) is currently at a share price of $57. The company is currently trading a volume of 133,774 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. 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 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. OKS' D/E ratio is 87%. 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. 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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