This morning's trading has marked a bad day for the market so far. The Nasdaq is down 0.2%; the S&P 500 has decreased 0.3%; and the Dow has declined 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.Despite a bad day for the market overall so far, the Utilities sector (XLU) is up 0.3% and its biggest movers are currently:
|Company||Market Cap||Percentage Change|
|Progress Energy (NYSE: PGN)||$17.21 billion||+3.3%|
|Clean Energy Fuels Corp. (Nasdaq: CLNE)||$1.22 billion||-3%|
|Crestwood Midstream Partners LP (NYSE: CMLP)||$1.09 billion||+2.9%|
|Exterran Partners, L.P. (Nasdaq: EXLP)||$844.9 million||-2.7%|
|TransAlta Corporation (USA) (NYSE: TAC)||$3.89 billion||-2.3%|
|Copano Energy, L.L.C. (Nasdaq: CPNO)||$1.96 billion||+1.7%|
|National Fuel Gas Co. (NYSE: NFG)||$3.74 billion||-1.5%|
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Progress (NYSE: PGN) is at $60.02 per share after an increase of 3.3%. This morning, 6.2 million shares have been traded, above yesterday's volume of 1.3 million shares. 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 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. PGN has a gross profit margin of 41.8%. 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). Relative to its gross profit margin, PGN's operating margin of 17.4% is on the low side. 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 profit margin for the company is 6.2%.
Looking at a company's valuation ratios is a good way of getting a basic idea as to its value as an investment. The price/book value ratio is calculated by dividing the current stock price by the company's book value per share. PGN's P/B ratio of 1.78 shows that its share price is higher than its book value. This may be a sign that the company is overvalued. Users need to be careful when applying this ratio though, as it is more useful for industrial companies that have a lot of tangible assets than it is for technology or consumer product companies that may not have much in the way of hard assets.
SEE: Using The Price-To-Book Ratio To Evaluate Companies
At $13.70, Clean Energy (Nasdaq: CLNE) has slipped 3%. So far today, the company's volume is 896,827 shares. 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 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. CLNE's gross profit margin is 25.2%. CLNE has negative operating and net profit margins. This is because the company reported a net loss and net operating loss in the most recent quarter.
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. The P/S ratio for CLNE is a high 6.1. 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.
After rising 2.9%, Crestwood Midstream (NYSE: CMLP) is currently trading at a share price of $25.89. The company's volume for the day so far is 25,702 share, 0.4 times the current three-month average. High volume indicates a lot of investor interest while low volume indicates the opposite.
Margin ratios highlight companies that are worth further examination. CMLP has a high gross profit margin of 79.5%. A high gross profit margin generally means that the company can make a reasonable profit on sales, provided that overhead costs do not increase. Tracking net profit margin over time for a single company can be a valuable tool for seeing how a business is developing. The company has a net profit margin of 20%, high compared to its gross profit margin. This usually means that it also has one or more advantages over its competition. 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. CMLP's operating profit margin is 32.9%.
Understanding investment valuation ratios allows the investor to assess the true value of an individual stock. The debt ratio is calculated by dividing total liabilities by total assets. CMLP has a debt ratio of 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.
Exterran Partners (Nasdaq: EXLP) has fallen 2.7% and is currently trading at $19.46 per share. The company's volume for the day so far is 51,556 shares. This is 0.4 times the current daily average. If a stock price makes a big move up or down, volume lets us know the significance of that move.
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. EXLP's gross profit margin is 51.2%. Operating margin provides a measure of a company's ability to pay its fixed costs such as interest on debt, particular if its business were to decline in the future. Operating profit margin for EXLP is 12%. Comparing net profit margins for companies with similar business models or in similar industries can yield valuable information as to which business is actually performing better. The company has a net profit margin of 3.1%.
When estimating the value of a particular investment, valuation ratios provide a good basis for assessing the value of an individual stock. The debt-equity (D/E) ratio is a leverage ratio. EXLP has a high D/E ratio of 127%. This shows that the company's assets are financed primarily through debt. The D/E ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage.
Falling 2.3%, TransAlta Corporation (NYSE: TAC) is currently at a share price of $16.73. So far today, the company's volume is 41,677 shares, which is less activity than yesterday's volume of 110,388 shares. The trading volume for a stock indicates the level of investor interest.
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. TAC has a gross profit margin of 42.6%. 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. Net margin is 7.8%.
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. TAC has a capitalization ratio of 53.1%, which is on the high end. The company may have trouble meeting operating and debt liabilities on time and surviving adverse economic conditions. 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.
Copano Energy (Nasdaq: CPNO) has increased to a share price of $27.65, a 1.7% rise. So far today, 75,334 shares have changed hands. 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.
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. CPNO has a low gross profit margin of 13.8%. Since gross profit margins tend to stay stable, sudden changes may indicate financial fraud, accounting irregularities or problems in the business. The operating and net profit margins for CPNO are both negative. This is because the company reported net and operating losses in the most recent quarter.
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/book value ratio provides a way of evaluating whether a stock is relatively cheap or expensive. CPNO has a P/B ratio of 3.38 which shows that its share price is higher than its book value. It is important to take the company's debt into account when using the P/B ratio as debt can boost a company's liabilities to the point where they wipe out much of the book value of its hard assets, creating artificially high P/B values. One problem with the P/B value ratio is that it can be difficult to calculate the true book value of a company, so investors should be aware that many measures of book value may provide only a rough estimate, and should be taken with a grain of salt.
SEE: Investment Valuation Ratios: Price/Book Value Ratio
After a decline of 1.5%, National Fuel (NYSE: NFG) has hit a share price of $44.29. The company's volume is currently 104,723 shares for the day, 0.1 times the average volume over the last three months. A stock's volume conveys how excited investors are about it.
Margin analysis is a great way to understand the profitability of companies. NFG has a gross profit margin of 45.3%. Net profit margin is a good ratio for determining how a company is performing. Net profit margin for the company is 12.9%.
Valuation ratios allow the investor to make a quick determination as to a company's investment value. 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 NFG is 17.6, above the industry average of 13.82. This could mean that the market is expecting big things over the next few months or years. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall.
SEE: Understanding The P/E Ratio
The Bottom Line On any given day, a particular stock may see positive or negative change in its share price. 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.