The market is currently up, with the Nasdaq increasing 0.1%, the S&P 500 climbing 0.3% and the Dow up 0.4%. 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 0.5% on a good day for the market overall. The biggest movers in the sector so far are:
|Company||Market Cap||Percentage Change|
|Companhia Energetica Minas Gerais (NYSE:CIG)||$13.45 billion||-20.7%|
|Companhia Paranaense de Energia (NYSE:ELP)||$4.68 billion||-13.4%|
|Centrais Eletricas Brasileiras SA (NYSE:EBR)||$9.73 billion||-9.2%|
|Companhia de Saneamento Basico (NYSE:SBS)||$9.45 billion||-7.2%|
|CPFL Energia S.A (NYSE:CPL)||$10.79 billion||-5%|
|Exelon (NYSE:EXC)||$30.29 billion||-2.5%|
|NorthWestern (NYSE:NWE)||$1.35 billion||-2.1%|
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After a precipitous drop of 20.7%, Companhia Energetica Minas Gerais (NYSE:CIG) is now trading at a share price of $12.51. So far today, 15.3 million shares of the company's stock have changed hands. Yesterday's volume was only 7.9 million 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. 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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. CIG's D/E ratio is 80%. 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.
Taking a 13.4% hit, Companhia Paranaense de Energia (NYSE:ELP) is currently trading at $14.81 per share. The company is currently trading a volume of 1.3 million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. 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). ELP has a PEG ratio of 1.62. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Centrais Eletricas Brasileiras SA (NYSE:EBR) is currently trading at a share price of $5.74, a 9.2% decline. With 1.8 million shares changing hands so far today, the company's volume is 1.1 times its current three-month average. A stock's volume conveys how excited investors are about it. Valuation ratios like 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 are useful in determining how attractive a potential or existing investment is. The price/book value ratio is especially important for value investors as it can provide an indication of the true value of a company's assets at a time when its business model may be failing. EBR's stock is trading for less than its book value as can be seen from it's P/B value of 0.23. Industries that require more infrastructure capital (for each dollar of profit) will usually trade at P/B ratios much lower than those that don't. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Falling 7.2%, Companhia de Saneamento Basico (NYSE:SBS) is currently at a share price of $76.97. So far this morning, 536,056 shares have changed hands. This is 1.6 times its current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. 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 dividend yield is calculated by dividing a company's dividends per share by its stock price. SBS has a dividend yield of 2.5%. Just as with the yield on a bond or certificate of deposit, the higher the dividend yield, the higher the return to the investor. SEE: Guide To Stock-Picking Strategies: Income Investing
Currently trading at $21.30 per share, CPFL Energia S.A (NYSE:CPL) has fallen 5%. So far today, the company's volume is 738,576 shares,. If a stock price makes a big move up or down, volume lets us know the significance of that move. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The price/sales ratio is used for spotting recovery situations or for double-checking that a company's growth has not become overvalued. The P/S ratio for CPL is 1.67, 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.
At $34.62, Exelon (NYSE:EXC) has slipped 2.5%. This morning, the company is trading a volume of 5.3 million 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. 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 ratio is calculated by dividing total liabilities by total assets. EXC has a debt ratio of 71.3%, which is on the high side. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
NorthWestern (NYSE:NWE) has decreased to $35.60 per share, a 2.1% fall. At 67,723 shares, the company's volume so far today is 0.3 times its average over the past three months. 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. Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. NWE has a P/E ratio of 14.4, high compared to the industry average of 10.46. 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: Can Investors Trust the P/E Ratio?
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.