The market is currently down, with the Nasdaq falling 0.3%, the S&P 500 slipping 0.3% and the Dow declining 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%, underperforming the market overall. The current biggest movers in the sector are:
|Company||Market Cap||Percentage Change|
|Ormat Technologies, Inc. (NYSE:ORA)||$948.1 million||-7.8%|
|Crestwood Midstream Partners LP (NYSE:CMLP)||$1.2 billion||-2%|
|Huaneng Power International, Inc. (ADR) (NYSE:HNP)||$10.05 billion||+1.4%|
|Williams Partners L.P. (NYSE:WPZ)||$16.77 billion||-1.3%|
|National Fuel Gas Co. (NYSE:NFG)||$3.94 billion||-1.3%|
|Duke Energy (NYSE:DUK)||$29.54 billion||-1.3%|
|Inergy Midstream LP (NYSE:NRGM)||$1.59 billion||+1.1%|
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At $19.24, Ormat Technologies (NYSE:ORA) has slipped 7.8%. So far today, the company's volume is 97,985 shares, 0.8 times the current daily average. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin analysis is a great way to understand the profitability of companies. ORA's gross profit margin is 50.1%. Net profit margin is a good tool for fundamental analysis and long-term investing but is less useful for technical analysts and short-term traders. The company has a net profit margin of -5.5%. A negative net profit margin means the company spent more money than it made. As with other margin ratios, the operating margin is a percentage, which allows for more standardized comparison across time and among different companies of different sizes. ORA's operating profit margin is 19.4%.
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/sales ratio measures a company's stock market value by its total revenues or alternatively, a company's price per share by its revenue per share. ORA has a high P/S ratio of 1.94. In young companies, a high P/S ratio is a sign of sales growth that is expected to turn into earnings and cash flow. 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.
Crestwood Midstream (NYSE:CMLP) is trading at $27.09 per share, down 2%. This morning, the company is trading a volume of 6,269 shares. 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. CMLP has a high gross profit margin of 79.5%. This means that the company will have a lot of money left over to spend on other business operations, such as research and development or marketing. Net profit margin is calculated by dividing net income by sales. Relative to its gross profit margin, the company has a high net profit margin of 20%. A company with a high profit margin has a greater capability to maintain strong earnings during a recession than does a company with a low profit margin, providing investors with a greater margin of safety. The operating margin ratio can also be useful for tracking an individual company's performance across time, where an increasing ratio is good and a declining ratio may provide cause for concern that a company's business model is weakening. Operating profit margin for CMLP is 32.9%.
It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. CMLP's debt ratio is 52.6%. 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.
Huaneng Power International, Inc (NYSE:HNP) has risen 1.4% and is currently trading at $29 per share. At 15,919 shares, the company's volume so far today is lighter than yesterday's volume of 115,043 shares. If a stock price moves on high volume, this means that the change is a significant one. Margin ratios highlight companies that are worth further examination. HNP has a gross profit margin of 34.6%. 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). HNP has an operating profit margin of 4.6%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 0.9%.
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. 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. HNP has a dividend yield of 0.9%, which is fairly low. This could indicate that that the stock is overpriced or that future dividends might be higher. For income-oriented investors such as retirees, a stock with a high dividend yield may be more attractive than a stock with a low dividend yield. SEE: Due Diligence On Dividends
Falling 1.3%, Williams Partners (NYSE:WPZ) is currently at a share price of $52.36. This morning, the company is trading a volume of 144,603 shares. This is 0.3 times its current three-month average. If a stock price makes a big move up or down, volume lets us know the significance of that move. 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. WPZ's gross profit margin is 36.7%. WPZ has an operating profit margin of 25% and a net profit margin of 20.8%, both low compared to its gross profit margin.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. The capitalization ratio for WPZ is 52.6%, 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. 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.
After a decline of 1.3%, National Fuel (NYSE:NFG) has hit a share price of $46.68. So far today, the company's volume is 89,222 shares, 0.1 times the average daily volume. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. 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 NFG is 45.3%. Ideally, a company's profit margin should be stable or rising; declining profit margin should be cause for concern or further investigation. Net margin is 12.9%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. NFG has a P/E ratio of 18.5, high compared to the industry average of 15.88. 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. 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: How To Find P/E And PEG Ratios
Duke Energy (NYSE:DUK) is down 1.3% to reach $65.38 per share. So far today, 5.1 million shares have changed hands. High volume indicates a lot of investor interest while low volume indicates the opposite. Margin analysis is a great way to understand the profitability of companies. DUK's gross profit margin is 41.1%. 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 10.3%.
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. The price/earnings to growth (PEG) ratio can reveal value what price/earnings (P/E) ratios alone may not so that if a company has a high P/E ratio (an indication that its stock is overpriced) but its earnings are growing very quickly, the PEG ratio may reveal that the company is actually fairly valued, or perhaps even a bargain. PEG ratio for DUK is consistent with the industry average at 4.22. 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.
Inergy (NYSE:NRGM) is currently trading at $21.59 per share, a 1.1% increase. So far today, 14,542 shares have changed hands, which is less activity than yesterday's volume of 81,080 shares. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. NRGM's gross profit margin of 81.3% is fairly high. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Net profit margin comes as close as possible to summing-up in a single figure how effectively managers run the business. Net margin is 24.7%, which is high relative to its gross profit margin. This usually means that it also has one or more advantages over its competition.
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 price/book value ratio is one of the more common methods of determining whether a stock is fairly valued. The P/B ratio for NRGM is 2.46, indicating that the stock is trading for more than its book value. This may be a sign that the company is overvalued. 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: How Buybacks Warps The Price-To-Book 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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.