After the morning's trading, the Nasdaq has been relatively flat, the S&P 500 is trading up 0.4% and the Dow has increased 0.5%. 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.
These are the biggest movers in the Utilities sector (XLU) (+0.6%):
|Company||Market Cap||Percentage Change|
|Boardwalk Pipeline (NYSE:BWP)||$5.83 billion||-4.2%|
|Clean Energy (Nasdaq:CLNE)||$1.14 billion||+3.2%|
|Enbridge Inc (NYSE:ENB)||$31.79 billion||+2.7%|
|Companhia de Saneamento Basico (NYSE:SBS)||$9.79 billion||+2.3%|
|Companhia Paranaense de Energia (NYSE:ELP)||$4.39 billion||-1.9%|
|Atlas (NYSE:ATLS)||$1.85 billion||-1.8%|
|Energy Transfer (NYSE:ETP)||$10.25 billion||-1.3%|
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Boardwalk Pipeline (NYSE:BWP) has fallen 4.2% and is currently trading at $26.85 per share. So far today, 5.8 million shares of the company's stock have changed hands. Yesterday's volume was only 371,218 shares. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Investors can make use of valuation ratios to estimate whether a stock is fairly valued. If the price/book value ratio of a stock is high, it may indicate that the stock is expensive, while a lower ratio may indicate that the stock is a bargain. The P/B ratio for BWP is 1.65, 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. All else being equal, a stock with a low P/B value ratio is more attractive than a stock with a high ratio. SEE: Investment Valuation Ratios: Price/Book Value Ratio
Rising 3.2%, Clean Energy (Nasdaq:CLNE) is currently trading at $13.58 per share. At 550,580 shares, the company's volume so far today is consistent with its current daily average. Volume is an important indicator because it indicates how significant a price shift is. 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. 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. CLNE's P/S ratio of 4.45 is on the high side. 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.
Enbridge Inc (NYSE:ENB) has risen 2.7% and is currently trading at $40.95 per share. So far today, 459,353 shares have changed hands. In technical analysis, trading volume is used to determine the strength of a market indicator. 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. ENB's debt ratio of 78% is fairly high. This might mean that the company now has low borrowing capacity, which reduces it's financial flexibility. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Companhia de Saneamento Basico (NYSE:SBS) is currently trading at $87.88 per share, a 2.3% increase. With 240,583 shares changing hands so far today, the company's volume is in keeping with its current three-month average. If a stock price moves on high volume, this means that the change is a significant one. When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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 78%. 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.
Companhia Paranaense de Energia (NYSE:ELP) is trading at $15.74 per share, down 1.9%. So far today, the company's volume is 86,242 shares. This is a sign that there will be less trading activity than there was yesterday. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. It is important for an investor to estimate the value of any potential or existing investment; valuation ratios make this easier. The capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. ELP has a fairly low capitalization ratio of 14.8%. A very low capitalization ratio might be a sign that the company is stagnating and reducing the potential earnings for shareholders. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
After a decline of 1.8%, Atlas (NYSE:ATLS) has hit a share price of $35.30. At 56,040 shares, the company's volume so far today 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 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. For investors primarily interested in the income a stock can generate, the dividend yield is an important determinant of how attractive a stock is. ATLS has a dividend yield of 2.8%. It is important to remember that while a higher dividend yield is more attractive, all else being equal, a higher dividend yield can also indicate greater perceived risk. SEE: Guide To Stock-Picking Strategies: Income Investing
Energy Transfer (NYSE:ETP) is down 1.3% to reach $41.20 per share. The company is currently trading a volume of 1.4 million shares. High volume indicates a lot of investor interest while low volume indicates the opposite. Valuation ratios allow the investor to make a quick determination as to a company's investment value. The price/earnings to growth (PEG) ratio divides a company's P/E ratio by its growth rate of earnings-per-share. ETP has a PEG ratio of 0.69. 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.
The Bottom Line The nature of the market is such that stocks will have good days and bad days. Daily stock performance should be weighed against historical performance and put in context of the market overall. Tools like valuation ratios and profit margins, however, are only as useful as the context you put them in; remember to take historical data and competitor performance into account.