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Utilities Stocks Making Big Moves on July 5, 2012
Currently, the Nasdaq has risen 0.3%, the S&P 500 is down 0.2% and the Dow has fallen 0.1%. 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) has moved up 0.2% overall, and these are the biggest movers in the sector so far:
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After a decline of 4%, Huaneng Power International, Inc (NYSE:HNP) has hit a share price of $28.25. This morning, the company is trading a volume of 37,062 shares. Volume is used to evaluate how meaningful the price movement of a stock 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. HNP has a gross profit margin of 34.6%. The operating profit margin indicates how much EBIT is generated per dollar of sales. HNP's operating profit margin is 4.6%. Net profit margins are those generated from all phases of a business, including taxes. Net margin is 0.9%.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for HNP is 0.46, which is relatively low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
Falling 2.2%, Companhia de Saneamento Basico (NYSE:SBS) is currently at a share price of $75.79. At 61,872 shares, the company's volume so far today is 0.3 times its current three-month average. A stock's volume conveys how excited investors are about it. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. The gross profit margin for SBS is 39%. Relative to its gross profit margin, SBS' operating profit margin of 27.5% and net profit margin of 15.5% are low.
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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. Relative to the industry P/E ratio of 17.61, SBS' 10.3 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. 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: Investment Valuation Ratios: Price/Earnings Ratio
Companhia Energetica Minas Gerais (NYSE:CIG) is currently trading at a share price of $18.63, a 2.1% decline. The company is trading at a volume of 883,653 shares. This is less trading activity than there was yesterday. 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. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CIG has a capitalization ratio of 40.4%. 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.
At $24.20, CPFL Energia S.A (NYSE:CPL) has slipped 1.7%. At 152,773 shares, the company's volume so far today is 0.3 times the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. CPL has a gross profit margin of 36.2%. Net profit margin is a good ratio for determining how a company is performing. The company's net profit margin is 11.2%.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. CPL has a P/B ratio of 2.84 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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
Crestwood Midstream (NYSE:CMLP) is at $26.98 per share after an increase of 1.7%. So far today, 6,730 shares have changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. CMLP has a gross profit margin of 79.5%, which is on the high end. This may indicate that the company is over-pricing its products and/or services. 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 20%, which is high relative to its gross profit margin. 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. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. CMLP has an operating profit margin of 32.9%.
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. CMLP's dividend yield is 7.5%. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Due Diligence On Dividends
DCP Midstream (NYSE:DPM) has fallen 1.4% and is currently trading at $40.96 per share. The company's volume for the day so far is 24,447 share, 0.2 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. 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. DPM has a low gross profit margin of 15.5%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. DPM's operating margin of 5.9% and net margin of 7.9% are low relative to its gross margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. DPM has a debt ratio of 55.2%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Currently trading at $39.77 per share, Enbridge Inc (NYSE:ENB) has fallen 1.2%. The company's volume for the day so far is 186,875 shares. Trading activity is down from yesterday when 689,065 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. Margin ratios highlight companies that are worth further examination. ENB has a low gross profit margin of 22.5%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Compared with its gross profit margin, ENB's operating profit margin of 7.3% and net profit margin of 4.2% are low.
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-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. ENB has a high D/E ratio of 295%. This shows that the company's assets are financed primarily through debt. 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.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
The Utilities sector (XLU) has moved up 0.2% overall, and these are the biggest movers in the sector so far:
| Company | Market Cap | Percentage Change |
| Huaneng Power International, Inc. (ADR) (NYSE:HNP) | $10.34 billion | -4% |
| Companhia de Saneamento Basico (ADR) (NYSE:SBS) | $8.82 billion | -2.2% |
| Companhia Energetica Minas Gerais (ADR) (NYSE:CIG) | $12.99 billion | -2.1% |
| CPFL Energia S.A. (ADR) (NYSE:CPL) | $11.85 billion | -1.7% |
| Crestwood Midstream Partners LP (NYSE:CMLP) | $1.15 billion | +1.7% |
| DCP Midstream Partners, LP (NYSE:DPM) | $2.16 billion | -1.4% |
| Enbridge Inc. (USA) (NYSE:ENB) | $31.99 billion | -1.2% |
After a decline of 4%, Huaneng Power International, Inc (NYSE:HNP) has hit a share price of $28.25. This morning, the company is trading a volume of 37,062 shares. Volume is used to evaluate how meaningful the price movement of a stock 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. HNP has a gross profit margin of 34.6%. The operating profit margin indicates how much EBIT is generated per dollar of sales. HNP's operating profit margin is 4.6%. Net profit margins are those generated from all phases of a business, including taxes. Net margin is 0.9%.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. The P/S ratio for HNP is 0.46, which is relatively low. Coupled with high relative strength in the previous twelve months, a low P/S ratio is one of the most potent combinations of investment criteria. It is important to keep in mind when looking at the P/S ratio that just because a company is generating revenues, this does not mean that the company is profitable, and in the long run, profits drive stock prices.
Falling 2.2%, Companhia de Saneamento Basico (NYSE:SBS) is currently at a share price of $75.79. At 61,872 shares, the company's volume so far today is 0.3 times its current three-month average. A stock's volume conveys how excited investors are about it. Profit-margin ratios help us to keep score, as measured over time, of management's ability to generate profits and manage costs and expenses. There are three key profit-margin ratios: gross profit margin, operating profit margin and net profit margin. The gross profit margin for SBS is 39%. Relative to its gross profit margin, SBS' operating profit margin of 27.5% and net profit margin of 15.5% are low.
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. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. Relative to the industry P/E ratio of 17.61, SBS' 10.3 is low. A low P/E ratio may indicate that the market expects relatively slower earnings growth. 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: Investment Valuation Ratios: Price/Earnings Ratio
Companhia Energetica Minas Gerais (NYSE:CIG) is currently trading at a share price of $18.63, a 2.1% decline. The company is trading at a volume of 883,653 shares. This is less trading activity than there was yesterday. 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. 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 capitalization ratio is calculated by dividing long-term debt by the sum of long-term debt and shareholders' equity. CIG has a capitalization ratio of 40.4%. 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.
At $24.20, CPFL Energia S.A (NYSE:CPL) has slipped 1.7%. At 152,773 shares, the company's volume so far today is 0.3 times the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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. CPL has a gross profit margin of 36.2%. Net profit margin is a good ratio for determining how a company is performing. The company's net profit margin is 11.2%.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. 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. CPL has a P/B ratio of 2.84 which shows that its share price is higher than its book value. This may be a sign that the company is overvalued. 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
Crestwood Midstream (NYSE:CMLP) is at $26.98 per share after an increase of 1.7%. So far today, 6,730 shares have changed hands. If a stock price makes a big move up or down, volume lets us know the significance of that move. Margin analysis is a great way to understand the profitability of companies. CMLP has a gross profit margin of 79.5%, which is on the high end. This may indicate that the company is over-pricing its products and/or services. 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 20%, which is high relative to its gross profit margin. 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. Value investors, investors in distressed securities, and junk bond investors will probably pay more attention to the operating margin ratio. CMLP has an operating profit margin of 32.9%.
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. CMLP's dividend yield is 7.5%. Simply comparing the level of dividends that two stocks pay does not give a true reflection of which security is more attractive, so investors calculate the dividend yield in order to standardize dividend payments. SEE: Due Diligence On Dividends
DCP Midstream (NYSE:DPM) has fallen 1.4% and is currently trading at $40.96 per share. The company's volume for the day so far is 24,447 share, 0.2 times the current three-month average. If a stock price moves on high volume, this means that the change is a significant one. 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. DPM has a low gross profit margin of 15.5%. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. DPM's operating margin of 5.9% and net margin of 7.9% are low relative to its gross margin.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The debt ratio measures the leverage of a company, and a company's leverage is a good way to assess risk. DPM has a debt ratio of 55.2%. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
Currently trading at $39.77 per share, Enbridge Inc (NYSE:ENB) has fallen 1.2%. The company's volume for the day so far is 186,875 shares. Trading activity is down from yesterday when 689,065 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. Margin ratios highlight companies that are worth further examination. ENB has a low gross profit margin of 22.5%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. Compared with its gross profit margin, ENB's operating profit margin of 7.3% and net profit margin of 4.2% are low.
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-equity (D/E) ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. ENB has a high D/E ratio of 295%. This shows that the company's assets are financed primarily through debt. 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.
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. However, these fundamental metrics must be analyzed with historic data, industry information in addition to firm specific financial statements.
by
Investopedia Staff
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