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Utility Stocks: Reviewing Implied Volatility and Short Interest

PART:
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Part 3
Utility Stocks: Reviewing Implied Volatility and Short Interest PART 3 OF 3

Short Interest: Investors Should Watch These Utility Stocks

PPL Corporation

On February 22, 2017, PPL Corporation (PPL) had a short interest-to-equity float ratio of 17.2%. It was the highest among the utility stocks that make up the Utilities Select Sector SPDR ETF (XLU).

Short Interest: Investors Should Watch These Utility Stocks

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In the past three months, PPL Corporation rose 8.6%. Its short interest-to-equity float ratio rose 18.4x in the last three months. Its net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio is 4.7x.

In the last four quarters, PPL Corporation’s revenue rose 2.9%, while its operating profit rose 15.7%. Its operating profit margin is 40.5%—compared to the industry median of 20.4%.

NRG Energy

NRG Energy (NRG) has a short interest-to-equity float ratio of 5.1%. In the past three months, NRG Energy rose 54.3%—the most among utility stocks with the highest short interest. NRG Energy’s short interest-to-equity float ratio fell 31.5% in the last three months. Its net debt-to-EBITDA ratio is 6.4x. We discussed its earnings trend in the previous part.

NRG Energy also has the highest implied volatility among the utility stocks that make up XLU. Its high short interest could also help explain why it has high implied volatility. High short interest in a stock reflects the market’s expectation of a large fall. It can cause the implied volatility to rise.

WEC Energy

WEC Energy’s (WEC) short interest-to-equity float ratio is 3.9%. In the last three months, the stock rose 3.2%, while its short interest-to-equity float ratio rose 2.2%. Its net debt-to-EBITDA ratio is 4.1x. In the last four quarters, WEC Energy’s revenue rose 6.2%, while its operating profit fell 4.8%. Its operating profit margin is 23.1%.

Entergy 

Entergy’s (ETR) short interest-to-equity float ratio is 3.4%. Its net debt-to-EBITDA ratio is 3.5x. In the last three months, the stock rose 7.7%, while its short interest-to-equity float ratio rose 6%. In the last four quarters, Entergy’s revenue rose 5.5% and its operating profit grew 2.7x. Its operating profit margin is 16.8%.

Consolidated Edison

Consolidated Edison’s (ED) short interest-to-equity float ratio is 3.4%. Its net debt-to-EBITDA ratio is 4.1x. The stock rose 6.7% in the last three months, while its short interest-to-equity float ratio fell 3.6%.

In the last four quarters, Consolidated Edison’s revenue didn’t change, while its operating profit rose 19.8%. Its operating profit margin is 20.5%.

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