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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (45908)	12/10/2011 12:53:04 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78476

re UGI analysis: "The article below discusses UGI's uncertain growth prospects when looking at their margins: Gross, Operating & Net when compared to competitors. The bottom line is UGI is not that efficient." Okay, I agree w/your conclusion above. I don't agree with the fool author's conclusion based on the article's numbers. There are two things of issue: Is UGI doing less well than similar companies that are mentioned? It may be, I don't know. (I'm interested in MDU, also have shares in TEG -- so if these two have better prospects than UGI based on a margin analysis -- that's okay with me.) The article focuses solely on margins. I generally only use net, bottom-line margin in my analyses. Margins are based on sales. So sales growth or lack of it has to be considered. Imo. If margins are decreasing, but sales growth increasing -- that may be a positive for the stock or its earnings. Since I'm also one who uses price/sales in analyses, if sales growth is stagnant or even decreasing, but price has fallen further (resulting in a historically low psr), the stock may be a buy for value investing. None of this is considered in the article. Right now UGI has a relatively high psr, and to my mind, a relatively high p/e. So these are negatives. Perhaps expected given that more people seeking safety seem to have been attracted to utilities, thus pushing up utility stock prices (and these metrics). The author is right that 3.8% now is low compared to past two years of 4.7% (peak year) and 4.5%. However, over ten years (not five years), net margin now seems to be about where it's mostly been: 3.8% vs. 4.7, 4.5, 3.2, 3.7, 3.4, 3.8,2.9, 3.3, 3.4. Using five-year's data makes the current margin look worse than it is, imo. In the past ten years, stated book value has steadily increased (4.06-->17.68), and the stock has moved up: finance.yahoo.com And dividends, while the yield is only 3.6% now, have increased too. We may or many not have to worry about UGI. It doesn't seem to me that it will be because the author sees a "low margin" of 3.8% or because the 3.8% margin has shrunk based on a five-year number. I've not looked at gross or operating margins -- I suspect if I did, my conclusions would still remain: UGI margin numbers shouldn't stop anyone from considering UGI now as a buy.