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Tickers in this Article: MWE, WPZ, OKS, EOC, TRGP, ALE, TCP
The market has been slipping so far today. The Nasdaq is down 1.7%; the S&P 500 is trading down 1.3%; and the Dow has decreased 1.4%. 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 currently ahead of the overall market, down only 0.6%, and its biggest movers are currently:
CompanyMarket CapPercentage Change
Duke Energy (NYSE:DUK)$30.58 billion-3%
Companhia Paranaense de Energia (ADR) (NYSE:ELP)$5.99 billion-2.2%
OGE Energy Corp. (NYSE:OGE)$5.1 billion-2%
CPFL Energia S.A. (ADR) (NYSE:CPL)$11.7 billion-2%
Companhia de Saneamento Basico (ADR) (NYSE:SBS)$8.72 billion-1.9%
WGL Holdings Inc (NYSE:WGL)$2.09 billion-1.7%
Brookfield Infrastructure Partners L.P. (NYSE:BIP)$4.5 billion-1.5%
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Currently trading at $66.52 per share, Duke Energy (NYSE:DUK) has fallen 3%. The company is trading at a volume of 4.1 million shares. This is less trading activity than there was yesterday. Volume is used to evaluate how meaningful the price movement of a stock is. 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. The gross profit margin for DUK is 41.1%. While ratios such as price/earnings (P/E) or price/book value look at the relative attractiveness of a stock, the net profit margin ratio focuses on company performance rather that stock market valuation. Net margin is 10.3%.

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 is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. DUK has a capitalization ratio of 45.5%. 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 2.2%, Companhia Paranaense de Energia (NYSE:ELP) is currently at a share price of $21.40. At 67,022 shares, the company's volume so far today is 0.2 times the average daily volume. If a stock price moves on high volume, this means that the change is a significant one. Margin analysis is a great way to understand the profitability of companies. ELP has a gross profit margin of 44.3%. Operating profit gives investors an opportunity to do profit-margin comparisons between companies that do not issue a separate disclosure of their cost of goods sold figures (which are needed to do gross margin analysis). The operating margin for ELP is 22.8%, which is low compared its gross profit margin. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company's net profit margin is 13.7%.

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/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. ELP has a P/B ratio of 0.88, which shows that its book value is higher than its share price. This is due to one of two possibilities: that the stock is being unfairly or incorrectly undervalued by investors because of some transitory circumstance and represents an attractive buying opportunity at a bargain price or that the market's low opinion and valuation of the company are correct, at least over the foreseeable future. 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: How Buybacks Warps The Price-To-Book Ratio

Slipping 2%, OGE (NYSE:OGE) is currently trading at $50.67 per share. So far today, 147,955 shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. OGE's gross profit margin is 28%. Net profit margin is a good ratio for determining how a company is performing. The company's net margin is 9.1%, which is low compared to its gross margin. A company with a low or negative net profit margin can potentially increase its profitability by taking steps to reduce costs and increase sales.

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. 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. OGE has a dividend yield of 3%. 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: Investment Valuation Ratios: Dividend Yield

After a decline of 2%, CPFL Energia S.A (NYSE:CPL) has hit a share price of $23.82. At 84,495 shares, the company's volume so far today is 0.2 times its average over the past three months. 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. 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 CPL is 36.2%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. Net profit margin for the company is 11.2%.

Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. The debt ratio for CPL is 73.3%, which is relatively high. This means that most of the company's assets are financed through debt. 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.

Companhia de Saneamento Basico (NYSE:SBS) is trading at $75.06 per share, down 1.9%. The company's volume is currently 26,202 shares. Yesterday, 129,676 shares changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. SBS has a gross profit margin of 39%. SBS has an operating profit margin of 27.5% and a net profit margin of 15.5%, both low compared to its gross profit margin.

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. 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. SBS has a D/E ratio of 75%. 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.

Currently trading at $39.84 per share, WGL Holdings (NYSE:WGL) has fallen 1.7%. At 85,951 shares, the company's volume so far today is 0.3 times the average daily volume. Volume is an important indicator because it indicates how significant a price shift is. 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. WGL has a low gross profit margin of 17.7%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Net profit margin is calculated by dividing net income by sales. The company has a net profit margin of 3.9%, which is low relative to its gross profit margin. This is potentially worrying, as companies with low profit margins are vulnerable to poor market conditions.

Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. As with most ratios, comparisons of company price/earnings to growth ratios (PEG ratios) are most appropriate for similar companies. WGL's PEG ratio is 4.41. 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.

Brookfield Infrastructure Partners (NYSE:BIP) is currently trading at a share price of $33.48, a 1.5% decline. This morning, the company is trading a volume of 50,766 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. Margin analysis tells us how effectively management can wring profits from sales and how much room a company has to withstand a downturn, fend off competition and make mistakes. The gross profit margin for BIP is 43.3%. Operating margin can be an important ratio for some investors, particularly those investing in weaker companies or companies in cyclical industries. BIP's operating profit margin of 31.5% is low relative to its gross profit margin. Because the business models of companies vary so widely, it can be difficult to compare net profit margin ratios for companies in different industries. Net margin is 9.2%.

When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. While measuring a price/earnings ratio (P/E ratio) is a popular valuation technique, the measure cannot be calculated for companies without earnings, so some investors analyze the price/sales ratio. BIP has a high P/S ratio of 2.46. This could be a good sign if the share price increases. 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.

The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. It is important to weigh current activity against historical performance when making any investment decisions. 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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