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Traders: Why These Utility Stocks Deserve a Deeper Look

PART:
1 2 3
Part 3
Traders: Why These Utility Stocks Deserve a Deeper Look PART 3 OF 3

Why These Utility Stocks Should Concern You

PPL’s short interest-to-equity

On March 28, 2017, PPL Corporation (PPL) had a short interest-to-equity float ratio of 16.3%—the highest among the utility stocks that make up the Utilities Select Sector SPDR ETF (XLU).

Why These Utility Stocks Should Concern You

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In the past three months, PPL has risen 11.3%, while its short interest-to-equity float ratio has risen 8.6x. Its net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio is 4.7x.

In the last four quarters, PPL’s revenue has risen 2.9%, while its operating profit has risen 15.7%. Its operating profit margin is 40.5%.

NRG Energy

NRG Energy (NRG) has a short interest-to-equity float ratio of 4.6%. In the past three months, NRG Energy has risen 45.7%—the most among utility stocks with high short interests. Its short interest-to-equity float ratio has fallen 38.8% in the last three months. Its net debt-to-EBITDA ratio is 6.6x.

As we saw in the first two parts of this series, NRG Energy had the highest implied volatility among the utility stocks that make up XLU. Its high short interest could explain why it has high implied volatility. High short interest in a stock shows the market’s expectation of a large fall, which can cause a stock’s implied volatility to rise. In the last four quarters, its revenue has fallen 10.8%, while its adjusted operating income has fallen 81.5%. NRG Energy’s operating profit margin is 9.8%.

Scana

Scana’s (SCG) short interest-to-equity float ratio is 4.0%. In the last three months, Scana stock has fallen 9.3%, while its short interest-to-equity float ratio has risen 3.5%. Its net debt-to-EBITDA ratio is 4.7x.

In the last four quarters, Scana’s revenue has risen 10.6%, while its operating profit has risen 18.2%. Its operating profit margin is 27.3%.

Consolidated Edison

Consolidated Edison’s (ED) short interest-to-equity float ratio is 3.5%. Its net debt-to-EBITDA ratio is 4.1x. Its stock has risen 7.5% in the last three months, while its short interest-to-equity float ratio has fallen 4%.

In the last four quarters, Consolidated Edison’s revenue hasn’t changed much, although its operating profit has risen 19.8%. Its operating profit margin is 20.5%.

Dominion Resources

Dominion Resources’ (D) short interest-to-equity float ratio is 3.3%. Its net debt-to-EBITDA ratio is 6.3x. In the last three months, the stock has risen 2.3%, while its short interest-to-equity float ratio has risen 5%. In the last four quarters, Dominion Resources’ revenue has risen 20.3%, while its operating profit has risen 28.4%. Its operating profit margin is 31.5%.

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