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National Grid plc and More Big Movers in Utilities on September 28, 2012
The morning has been bad for the market. The Nasdaq has slipped 0.8%; the S&P 500 is trading down 0.7%; and the Dow is down 0.7%. 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 currently ahead of the overall market, down only 0.1%, and its biggest movers are currently:
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National Grid plc (NYSE:NGG) is down 2% to reach $55.17 per share. The company is currently trading a volume of 102,056 shares. 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. The D/E ratio for NGG is 249%. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
After a decline of 1.6%, Atlas (NYSE:ATLS) has hit a share price of $33.83. The company's volume is currently 112,456 shares for the day, more than yesterday's 78,214 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. The capitalization ratio for ATLS is 65%, which is fairly high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
TC (NYSE:TCP) has decreased to $44.07 per share, a 1.5% fall. So far this morning, 52,296 shares have changed hands. This is in keeping with its current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. TCP has a PEG ratio of -14.09. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Western Gas (NYSE:WES) is currently trading at a share price of $49.98, a 1.5% decline. With 94,716 shares changing hands so far today, the company's volume is in keeping with the average volume 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. WES' stock is trading for more than its book value with a P/B ratio of 2.89. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Falling 1.3%, Enbridge Inc (NYSE:ENB) is currently at a share price of $38.92. So far today, 139,307 shares have changed hands. A stock's volume conveys how excited investors are about it. 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. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. ENB has a dividend yield of 2.9%. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Due Diligence On Dividends
American States (NYSE:AWR) is at $44.01 per share after an increase of 1.3%. So far today, the company's volume is 36,822 shares, while it was 93,336 shares yesterday. 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. 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/sales ratio measures a company's stock market price by its revenues. The P/S ratio for AWR is a high 1.72. This could be a good sign if the share price increases. 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 $42.11, Energy Transfer (NYSE:ETP) has slipped 1.1%. This morning, the company's volume is 714,998 shares. This is 0.3 times the average daily volume. 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. 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 debt ratio is calculated by dividing total liabilities by total assets. ETP has a high debt ratio of 63.5%. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.
The Utilities sector (XLU) is currently ahead of the overall market, down only 0.1%, and its biggest movers are currently:
| Company | Market Cap | Percentage Change |
| National Grid plc (NYSE:NGG) | $40.18 billion | -2% |
| Atlas (NYSE:ATLS) | $1.76 billion | -1.6% |
| TC (NYSE:TCP) | $2.39 billion | -1.5% |
| Western Gas (NYSE:WES) | $4.86 billion | -1.5% |
| Enbridge Inc (NYSE:ENB) | $31.46 billion | -1.3% |
| American States (NYSE:AWR) | $822.4 million | +1.3% |
| Energy Transfer (NYSE:ETP) | $10.45 billion | -1.1% |
National Grid plc (NYSE:NGG) is down 2% to reach $55.17 per share. The company is currently trading a volume of 102,056 shares. 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. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. To a large degree, the debt-equity (D/E) ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. The D/E ratio for NGG is 249%. Generally, a high D/E ratio means that the company may have difficulty generating enough cash to pay off its debts. The D/E ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
After a decline of 1.6%, Atlas (NYSE:ATLS) has hit a share price of $33.83. The company's volume is currently 112,456 shares for the day, more than yesterday's 78,214 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The capitalization ratio measures the debt component of the capital structure, or capitalization of a company (i.e., the sum of long-term debt liabilities and shareholder equity) to support operations and growth. The capitalization ratio for ATLS is 65%, which is fairly high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into the use of leverage by a company.
TC (NYSE:TCP) has decreased to $44.07 per share, a 1.5% fall. So far this morning, 52,296 shares have changed hands. This is in keeping with its current daily average. Volume indicates the level of interest that investors have in a company at its current price. 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. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. TCP has a PEG ratio of -14.09. Because of the adjustment for earnings growth rate, the PEG ratio is somewhat more useful than many formulas for comparing companies in different industries.
Western Gas (NYSE:WES) is currently trading at a share price of $49.98, a 1.5% decline. With 94,716 shares changing hands so far today, the company's volume is in keeping with the average volume 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. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. 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. WES' stock is trading for more than its book value with a P/B ratio of 2.89. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. P/B has its shortcomings but is still widely used as a valuation metric, more relevant for use by investors looking at capital-intensive or finance-related businesses, such as banks; book value does not carry much meaning for service-based firms with few tangible assets. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Falling 1.3%, Enbridge Inc (NYSE:ENB) is currently at a share price of $38.92. So far today, 139,307 shares have changed hands. A stock's volume conveys how excited investors are about it. 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. Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. ENB has a dividend yield of 2.9%. A higher dividend yield may indicate a risk of a fall in the price of the security, or a cut in the level of dividend payments, either of which would have the effect of dropping future returns. SEE: Due Diligence On Dividends
American States (NYSE:AWR) is at $44.01 per share after an increase of 1.3%. So far today, the company's volume is 36,822 shares, while it was 93,336 shares yesterday. 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. 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/sales ratio measures a company's stock market price by its revenues. The P/S ratio for AWR is a high 1.72. This could be a good sign if the share price increases. 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 $42.11, Energy Transfer (NYSE:ETP) has slipped 1.1%. This morning, the company's volume is 714,998 shares. This is 0.3 times the average daily volume. 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. 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 debt ratio is calculated by dividing total liabilities by total assets. ETP has a high debt ratio of 63.5%. 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.
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.
by
Investopedia Staff
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