Question: What ratio formulas are used to evaluate publicly traded companies in the Utilities sector for investing in the companies stock?
To evaluate publicly traded companies in the Utilities sector for investing in their stock, some of the key ratio formulas used are:
Debt-to-Equity (D/E) Ratio
D/E Ratio = Total Liabilities / Shareholders’ Equity The debt-to-equity ratio compares a company’s total liabilities to its shareholders’ equity. It provides insight into how much debt a company is using to finance its assets relative to the amount of equity financing. Utilities often carry high debt levels, with ratios above 2.0 viewed unfavorably, while ratios of 0.5 and below are considered excellent.
Price-to-Earnings (P/E) Ratio
P/E Ratio = Stock Price per Share / Earnings per Share (EPS) The P/E ratio compares a company’s stock price to its earnings per share. For the Utilities sector, the average P/E ratio was around 26.8 in 2020, projected to be 28.5 in 2021, below the S&P 500 average of 35x. Utilities stocks tend to perform best when interest rates are low, as they typically hold high levels of debt.
Quick Ratio
Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current Liabilities The quick ratio measures a company’s ability to pay current liabilities with assets that can be quickly converted to cash. A ratio of less than 1 can indicate insufficient liquid assets to cover short-term liabilities.
Return on Equity (ROE)
ROE = Net Income / Shareholders’ Equity ROE measures a utility company’s profitability by showing how much profit is generated with the money shareholders have invested. Higher ROE is preferred by investors. These ratios provide insight into the capital structure, valuation, liquidity, and profitability of utility companies. Analyzing them in combination, compared to industry peers and historical trends, helps investors assess the relative attractiveness of investing in a utility stock.
Question: Write html code for formulas an calculate debt to equity ratio, Price to Earnings ratio, Quick ratio, return on equity ratio.
Debt-to-Equity (D/E) Ratio
D/E Ratio = Total Liabilities / Shareholders’ Equity
Enter Total Liabilities:
Enter Shareholders’ Equity:
Price-to-Earnings (P/E) Ratio
P/E Ratio = Stock Price per Share / Earnings per Share (EPS)
Enter Stock Price per Share:
Enter Earnings per Share (EPS):
Quick Ratio
Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current Liabilities
Enter Current Assets:
Enter Inventory:
Enter Prepaid Expenses:
Enter Current Liabilities:
Return on Equity (ROE)
ROE = Net Income / Shareholders’ Equity
Enter Net Income:
Enter Shareholders’ Equity: