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Utility Stocks: A Look at Implied Volatility and Short Interest

PART:
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Part 3
Utility Stocks: A Look at Implied Volatility and Short Interest PART 3 OF 3

Why You Should Watch These Utility Stocks

PPL’s short interest-to-equity

On March 8, 2017, PPL (PPL) had a short interest-to-equity float ratio of 16.8%. It was the highest among the utility stocks that make up the Utilities Select Sector SPDR ETF (XLU).

Why You Should Watch These Utility Stocks

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In the past three months, PPL has risen 8.8%, and its short interest-to-equity float ratio has risen 9.9x. 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 was 40.5% compared to the industry median of 20.4%.

NRG Energy

NRG Energy (NRG) has a short interest-to-equity float ratio of 4.6%. In the past three months, NRG has risen 37.8%, the most among utility stocks with the highest short interest. Its short interest-to-equity float ratio has fallen 31.8% in the last three months, and its net debt-to-EBITDA ratio was 6.4x. We looked at its earnings trend in the previous part of this series.

As we saw in the first two parts of this series, NRG Energy has the highest implied volatility among the utility stocks that make up XLU. Its high short interest could explain why it has a 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.

Scana

Scana’s (SCG) short interest-to-equity float ratio is 3.5%. In the last three months, SCG stock has fallen 5.8%, while its short interest-to-equity float ratio has fallen 9.3%. Its net debt-to-EBITDA ratio is 4.1x.

In the last four quarters, SCG’s revenue rose 10.6%, while its operating profit rose 18.2%. Its operating profit margin is 27.3%. It’s one of the highest implied volatility stocks we covered in Part 1 of this series.

Consolidated Edison

Consolidated Edison’s (ED) short interest-to-equity float ratio is 3.4%. Its net debt-to-EBITDA ratio is 4.1x. Its stock has risen 7.0% in the last three months, while its short interest-to-equity float ratio has fallen 13.2%.

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%.

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 has risen 4.1%, while its short interest-to-equity float ratio has risen 19.4%. In the last four quarters, Entergy’s revenue has risen 5.5%, and its operating profit has risen 2.7x. Its operating profit margin is 16.8%.

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