Filed Under: ,
Tickers in this Article: MWE, HNP, UGI, XTXI, EPB, CNP, AWR
The market is doing well so far today. The Nasdaq has increased 0.6%; the S&P 500 is trading up 0.3%; and the Dow is up 0.3%. 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.

Despite a good day for the overall market so far, the Utilities sector (XLU) is down 0.2% and its current biggest movers are:
CompanyMarket CapPercentage Change
Markwest Energy Partners LP (NYSE:MWE)$6.89 billion-4.1%
Huaneng Power International, Inc. (ADR) (NYSE:HNP)$9.61 billion+2.6%
UGI Corp (NYSE:UGI)$3.41 billion+2.5%
Crosstex Energy, Inc. (Nasdaq:XTXI)$600.4 million-1.8%
El Paso Pipeline Partners, L.P. (NYSE:EPB)$7.08 billion+1.5%
CenterPoint Energy (NYSE:CNP)$8.88 billion-1.3%
American States Water Co (NYSE:AWR)$838.5 million+1.3%
Beginner's Guide To Thinkorswim Trading Platform

Markwest Energy (NYSE:MWE) has fallen 4.1% and is currently trading at $50.57 per share. At 5.3 million shares, the company's volume so far today is 12.8 times the current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. MWE's P/E ratio of 22.3 is under the industry average of 24.06. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. A high P/E ratio indicates a stock that is expensive, while a low P/E ratio indicates a stock that is cheap. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

Huaneng Power International, Inc (NYSE:HNP) has increased to a share price of $28.06, a 2.6% rise. The company is trading at a volume of 12,683 shares. At this rate, trading activity will likely be down from yesterday when 46,723 shares changed hands. 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. Understanding investment valuation ratios allows an investor to assess the true value of an individual stock. The debt ratio is calculated by dividing total liabilities by total assets. HNP has a debt ratio of 80.1%, which is on the high side. This means that the company's cash flow is significantly impacted by paying off principal and interest and that any negative change in performance or rise in interest rates could result in default. 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.

UGI (NYSE:UGI) has risen 2.5% to hit a current price of $31.10 per share. So far today, the company's volume is 199,347 shares, in keeping with its current three-month average. 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. 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. A company's capitalization (not to be confused with its market capitalization) is the term used to describe the makeup of a company's permanent or long-term capital, which consists of both long-term debt and shareholders' equity. UGI has a capitalization ratio of 60.6%, which is on the high end. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. 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.

Falling 1.8%, Crosstex Energy (Nasdaq:XTXI) is currently at a share price of $12.44. This morning, the company is trading a volume of 105,087 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. Investment valuation ratios can be very useful in estimating whether a stock price is too high, reasonable or a bargain investment opportunity. One of the favorite tools of many value investors is analyzing price/book value ratios, as it provides a measure of the underlying value of a company's assets as compared to the valuation of its equity. The P/B ratio for XTXI is 3.5, indicating that the stock is trading for more 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. A weakness of the P/B value ratio is that while the price component is easily determined by looking at the stock quote, the book value component is more difficult to estimate and more open to individual interpretation and analysis. SEE: Investment Valuation Ratios: Price/Book Value Ratio

Rising 1.5%, El Paso Pipeline Partners (NYSE:EPB) is currently trading at $34.60 per share. So far today, the company's volume is 189,914 shares, consistent with its current daily average. 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 dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. EPB has a dividend yield of 6.5%. 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: Due Diligence On Dividends

After a decline of 1.3%, CenterPoint (NYSE:CNP) has hit a share price of $20.50. The company's volume for the day so far is 3.5 million shares. This is more trading activity than there was yesterday. If a stock price moves on high volume, this means that the change is a significant one. 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 price/sales ratio measures a company's stock market price by its revenues. The P/S ratio for CNP is 1.16, which is relatively high. This could be a good sign if the share price increases. All things being equal, a low P/S ratio is good news for investors, while a very high one can be a warning sign.

American States (NYSE:AWR) is currently trading at $44.90 per share, a 1.3% increase. The company's volume is currently 44,884 shares for the day, 0.3 times its current three-month average. A stock's volume conveys how excited investors are about it. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. AWR has a P/E ratio of 17.6, in line with the industry average. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Can Investors Trust the P/E Ratio?

The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.

comments powered by Disqus

Trading Center