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Utilities Stocks Making Big Moves on June 26, 2012
The Nasdaq has increased 0.2%, the S&P 500 has climbed 0.1% and the Dow has declined 0.1% so far today. 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 trading up 0.1% overall, and these are the biggest movers in the sector so far:
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DCP Midstream (NYSE:DPM) has moved up 3% and is currently trading at $37.85 per share. The company's volume for the day so far is 52,738 shares. 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. DPM has a low gross profit margin of 15.5%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Operating margin for DPM is 5.9% and net margin is 7.9%, both low relative to its gross margin.
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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. DPM has a D/E ratio of 84%. 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 2.1%, Inergy (NYSE:NRGM) has hit a share price of $19.90. The company's volume is currently 13,845 shares for the day, 0.1 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. NRGM has a gross profit margin of 81.3%, which is on the high end. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Net profit margin is a good ratio for determining how a company is performing. Relative to its gross profit margin, the company has a high net profit margin of 24.7%. Companies with high net profit margins have a bigger cushion to protect themselves during the hard times.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. The P/E ratio for NRGM is 114.5, above the industry average of 21.06. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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
Huaneng Power International, Inc (NYSE:HNP) is up 1.8% to reach a current price of $28.90 per share. The company is trading at a volume of 74,500 shares. This is below yesterday's volume of 199,685 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. HNP has a gross profit margin of 34.6%. 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. HNP has an operating profit margin of 4.6%. Net profit margins are those generated from all phases of a business, including taxes. Net profit margin for the company is 0.9%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. HNP's stock is trading for more than its book value with a P/B ratio of 1.24. This may be a sign that the company is overvalued. P/B value comparisons should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Crosstex Energy (Nasdaq:XTXI) has decreased to $13.21 per share, a 1.6% fall. The company's volume is currently 18,719 shares for the day, 0.1 times the current three-month average. 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 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. 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. XTXI has a low gross profit margin of 14.9%. This may mean that the company is struggling to control production costs, or that a low amount of earnings is being generated from revenues. XTXI has an operating profit margin of 5.9% and a net profit margin of 0%, both low compared to its gross profit margin.
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. XTXI has a low P/S ratio of 0.36. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. 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.
Sempra Energy (NYSE:SRE) has increased to a share price of $67.68, a 1.6% rise. So far today, the company's volume is 536,552 shares. 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. 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. SRE's gross profit margin is 31%. Net profit margin compares net income with sales. Net margin is 13.5%, relatively low in comparison with its gross profit margin. This is a potential cause for concern, as companies with low profit margins can get wiped out in a downturn.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. SRE has a high debt ratio of 70.7%. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
TransAlta Corporation (NYSE:TAC) is trading at $16.28 per share, down 1.3%. So far today, the company's volume is 21,625 shares, 0.4 times the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 TAC is 42.6%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net margin is 7.8%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. Dividend yield for TAC is 7.1%. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Due Diligence On Dividends
Oneok (NYSE:OKE) is currently trading at a share price of $41.02, a 1.3% decline. The company's volume is currently 488,753 shares. Trading activity is down from yesterday when 1.4 million shares changed hands. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin analysis is a great way to understand the profitability of companies. OKE has a low gross profit margin of 13.2%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. OKE's operating margin of 9.5% and net margin of 6% are low relative to its gross margin.
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 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. OKE's capitalization ratio of 69.8% is relatively high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
The Utilities sector (XLU) is trading up 0.1% overall, and these are the biggest movers in the sector so far:
| Company | Market Cap | Percentage Change |
| DCP Midstream Partners, LP (NYSE:DPM) | $1.91 billion | +3% |
| Inergy Midstream LP (NYSE:NRGM) | $1.51 billion | -2.1% |
| Huaneng Power International, Inc. (ADR) (NYSE:HNP) | $9.98 billion | +1.8% |
| Crosstex Energy, Inc. (Nasdaq:XTXI) | $635.9 million | -1.6% |
| Sempra Energy (NYSE:SRE) | $16.05 billion | +1.6% |
| TransAlta Corporation (USA) (NYSE:TAC) | $3.75 billion | -1.3% |
| Oneok (NYSE:OKE) | $8.64 billion | -1.3% |
DCP Midstream (NYSE:DPM) has moved up 3% and is currently trading at $37.85 per share. The company's volume for the day so far is 52,738 shares. 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. DPM has a low gross profit margin of 15.5%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. Operating margin for DPM is 5.9% and net margin is 7.9%, both low relative to its gross margin.
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 debt-equity (D/E) ratio compares the total liabilities for a company to its total shareholder equity. DPM has a D/E ratio of 84%. 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 2.1%, Inergy (NYSE:NRGM) has hit a share price of $19.90. The company's volume is currently 13,845 shares for the day, 0.1 times the average daily volume. In technical analysis, trading volume is used to determine the strength of a market indicator. Margin ratios highlight companies that are worth further examination. NRGM has a gross profit margin of 81.3%, which is on the high end. Investors should track gross profit margin ratios over several years in order to see if earnings are consistent, growing or declining. Net profit margin is a good ratio for determining how a company is performing. Relative to its gross profit margin, the company has a high net profit margin of 24.7%. Companies with high net profit margins have a bigger cushion to protect themselves during the hard times.
Investors can make use of valuation ratios to estimate whether a stock is fairly valued. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. The P/E ratio for NRGM is 114.5, above the industry average of 21.06. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. 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
Huaneng Power International, Inc (NYSE:HNP) is up 1.8% to reach a current price of $28.90 per share. The company is trading at a volume of 74,500 shares. This is below yesterday's volume of 199,685 shares. High volume indicates a lot of investor interest while low volume indicates the opposite. 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. HNP has a gross profit margin of 34.6%. 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. HNP has an operating profit margin of 4.6%. Net profit margins are those generated from all phases of a business, including taxes. Net profit margin for the company is 0.9%.
Investment valuation ratios provide investors with an estimation, albeit a simplistic one, of the value of a stock. 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. HNP's stock is trading for more than its book value with a P/B ratio of 1.24. This may be a sign that the company is overvalued. P/B value comparisons should be made among companies in the same industry rather than across industries. SEE: Using The Price-To-Book Ratio To Evaluate Companies
Investors can use valuation ratios as tools to estimate what kind of deal a particular investment is. In a nutshell, the price/sales ratio shows how much Wall Street values every dollar of the company's sales. XTXI has a low P/S ratio of 0.36. Highly levered companies are likely to have lower P/S ratios because the price aspect of this ratio only measures stock market valuation while sales is a function of both stock market and bond market capitalization. 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.
Sempra Energy (NYSE:SRE) has increased to a share price of $67.68, a 1.6% rise. So far today, the company's volume is 536,552 shares. 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. 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. SRE's gross profit margin is 31%. Net profit margin compares net income with sales. Net margin is 13.5%, relatively low in comparison with its gross profit margin. This is a potential cause for concern, as companies with low profit margins can get wiped out in a downturn.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. 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. SRE has a high debt ratio of 70.7%. As such, the company is highly leveraged and not highly liquid. As with all financial ratios, a company's debt ratio should be compared with the industry average or similar companies.
TransAlta Corporation (NYSE:TAC) is trading at $16.28 per share, down 1.3%. So far today, the company's volume is 21,625 shares, 0.4 times the current daily average. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting. 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 TAC is 42.6%. A high net profit margin indicates a highly profitable company, and a low profit margin indicates the opposite. Net margin is 7.8%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. The dividend yield is measured by taking the annual dividends per share and dividing that number by the stock price. Dividend yield for TAC is 7.1%. High dividend yields are generally more important to value investors, investors in larger companies, and income oriented investors than they are to growth investors, investors in small cap stocks, and investors in new or emerging companies. SEE: Due Diligence On Dividends
Oneok (NYSE:OKE) is currently trading at a share price of $41.02, a 1.3% decline. The company's volume is currently 488,753 shares. Trading activity is down from yesterday when 1.4 million shares changed hands. When a stock price moves up or down, watching the volume is a good way of identifying how significant that shift is. Margin analysis is a great way to understand the profitability of companies. OKE has a low gross profit margin of 13.2%. A low gross profit margin compared to competitors may be a sign that the company is under-pricing its products and/or services. OKE's operating margin of 9.5% and net margin of 6% are low relative to its gross margin.
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 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. OKE's capitalization ratio of 69.8% is relatively high. A high capitalization ratio is not necessarily bad since higher financial leverage can increase the return on a shareholder's investment. Prudent use of leverage (debt) increases the financial resources available to a company for growth and expansion.
The Bottom Line No matter the economic climate, Wall Street will always have stocks that make major moves each week. 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.
by
Investopedia Staff
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