Utility Stocks: Analyzing Returns and Implied Volatilities
Utility stocks with high implied volatilities
NRG Energy (NRG) rose 53.9% in the past year ending on February 1, 2017. It has the highest implied volatility of all the utility companies that make up the Utilities Select Sector SPDR ETF (XLU). In the past five days, NRG fell 0.4%. Since January 4, 2017, NRG stock has been trending up.
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The above chart shows the one-year and last five-day returns of the stocks we identified in the previous part as having high and low implied volatilities. It shows how high volatility stocks moved sharper than low volatility stocks. They have also tended to fall more than low volatility stocks.
NRG rose the most in the past year among the list of high implied volatility utility stocks. In the last four quarters, its revenue fell 10.9%, while its operating income rose 84.8%. Its operating profit margin is 9.8%.
FirstEnergy (FE) was the only loser in the past year among the high implied volatility utility stocks. In the last four quarters, its revenue rose 4.0%, while its operating profit fell 5.2%. Its operating profit margin is 17.6%.
Returns of utility stocks with low implied volatilities
PPL Corporation (PPL) rose the least in the past year among the list of low implied volatility utility stocks. On February 1, 2017, PPL Corporation announced its 4Q16 financial results. Its revenue grew 2.9% in 4Q16—compared to 4Q15. Its operating profit rose 15.8% during the same period.
Dominion Resources (D) fell 5.8% on February 1, 2017. It reported its earnings results on February 1, 2017. The company said that it could witness a downturn in its earnings for 2017.
In the next part of this series, we’ll look at the utility stocks with the highest short interest-to-equity float ratios.