National Grid NGG Stock Analysis: Today we are looking at National Grid and its NGG stock, which falls in the utility sector. But before walking you through the stock analysis lets briefly explain about the utility sector.
What is the Utility Sector?
The utility sector is generally a high-yielding industry for the investors. However, it is also sensitive to interest rates changes. Companies that fall into this industry provide gas, electricity or water. It is also vital for the global economy and well being of each country’s citizens. Utility companies are highly leveraged, due to the expensive infrastructure requirements that the industry imposes, increasing their return on equity.
What is National Grid’s Position in the Utility Sector?
National Grid is a solid player in this industry. It possesses a high market share, with a presence in Europe and USA. Its cash flow reached $6.77B, capable of paying its huge amount of debt that comprises its capital structure. Further, National Grid NGG Stock reached its 3-year lowest price in the first week of December. Consequently, this could be seen as a good sign of buying the stock.
Turning to alternative sources of energy and innovating are the two biggest guns in National Grid’s arsenal. This helps them grow and gain market share.
So now let’s use IDDA for National Grid NGG Stock to see if it can fit in your investment portfolio. Let’s start with the first IDDA point, the fundamentals.
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1- Fundamental Points: National Grid NGG Stock
Who are they?
National Grid is one of the largest investor-owned energy companies in the globe. They operate mainly in the UK, and in the United States (Massachusetts, New York, Rhode Island). The company delivers electricity, natural gas, and clean energy. It not only saves electricity, but also generates, transmits and distributes it. Its clients outreach 20 million people in the United States.
However, simply selling a product is not enough to survive and National Grid is aware of that. This is why they also engage in development investments, such as natural gas pipelines and they invest in various energy-related sectors. Further, they deal with property management, LNG (Liquified Natural Gas) importation, and gas metering. National Grid was founded in 1990 and it is headquartered in London, UK.
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Recent Changes in Company Structure
Besides what they offer as a product, their management appears to be up for general improvement. Recently they hired Adriana Karaboutis as a Chief Information & Digital Officer. She will help the company develop an enterprise-wide digital strategy, deliver information systems and devices, improve the company’s digital security and mitigate the risk. Her prior experience with giant firms like Dell, General Motors and Ford make her a reliable expert to achieve the above-mentioned goals.
The company is run by Mr. John Pettigrew, the CEO and Executive Director. Mr. Andrew R. J. Bonfield has the role of the Finance Director. National Grid employs more than 28,000 people under its corporate name.
Who Are Their Top Competitors?
Their top competitors are two companies: Berkshire Hathaway Energy Company, and Duke Energy Corporation.
Berkshire Hathaway Energy Company generates energy from coal, natural gas, hydroelectric, wind, solar, and nuclear resources. As per 2017, they generated revenues of $18B, providing services throughout the United States to more than 10 million people.
Another competitor of National Grid NGG Stock is Duke Energy Corporation. It operates in three segments: Electric Utilities and Infrastructure, Gas Utilities, and Commercial Renewables. The three segments each offer a different kind of energy, operating in a number of States of America, generating, as per 2017, almost $23B of revenues.
What Are They Doing Right?
An innovation that National Grid NGG Stock tries to implement is that of providing to the customers the ability to track and manage their energy consumption. Their plan to achieve that comes through installing the right technology to the customers’ houses and giving access to the customers on their website. This way, they can track their energy consumption and behave accordingly throughout the month/year. This is What National Grid calls “Smart Energy Solutions” and also applies to workplaces, not only houses.
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Capital points
| National Grid NGG Stock | |
| Price as of 12/15 | $ 57.99 |
| 52 Wk Range | $ 57.91 – $ 75.29 |
| Shares Outstanding | 676.26 million |
| Market Cap | $ 37.462 billion |
| Beta | 0.22 |
| P/E (TTM) | 3.84 |
| P/B (MRQ) | 1.83 |
| Gross Profit (2016) | $ 4.011 billion |
| ROE | 11.33% |
| Diluted EPS | $ 15.11 |
| Total Debt/Equity (MRQ) | 163.22 |
National Grid NGG Stock reached its 3-year lowest price in the first week of December 2017. Currently, as per 12/15/2017, the National Grid NGG Stock is still being traded at $57.99, very close to the lowest of $57.91 per share.
The company hasn’t repurchased any shares, making its total shares outstanding reach the number of 676.26 million shares. What we notice by its beta is that National Grid is not that sensitive, as we would imagine (since it falls into the Utility industry), to market changes. Moreover, we notice that, as expected, the firm is highly leveraged, probably due to the enormous amount of infrastructure needed for such companies to survive/operate/expand. However, the cash flow that it generates is more than sufficient for a healthy function of the corporation.
This brings us to the second point of the IDDA, technical analysis.
2- Technical Points: National Grid NGG Stock Analysis
Monthly: Observing the 1 Month chart we notice that the National Grid NGG Stock has been experiencing an upward trend from mid-2010 to mid-2014. The stock experienced some ups and downs for of 2.5 years when it started its downward trend in mid-2016 up until now. The National Grid NGG stock is trading below the Ichimoku cloud and just dropped below the 50% Fibonacci’s retracement level.
If the bearish sentiment continues, we could expect the next support levels of 55.85 and 48.83 to be reached in medium-term.
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3- Market Sentiment
Observing the short-term charts, the National Grid NGG Stock has been in a downtrend since September of 2017. However, it appears that the stock behaves in a cyclical manner. So, there is a chance of an upcoming upward trend, after reaching key support levels.
National Grid NGG Stock Analysis – Investing Strategy
As the 4th point of the IDDA, you must calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio. Join us for a free MasterClass to learn more.
The company is structured with the customers at its center. This means that their number one objective is customer’s satisfaction. The company is headquartered in London, UK, however, the political situation there, due to Brexit, makes its future uncertain. This is why they invest enormous amounts of money in the US market, where the US currency is stronger as well. Further, they enjoy better regulation terms overseas. The company, though, is one of the greatest energy providers both in UK and Northeastern United States, possessing a huge number of clients worldwide.
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Anthony Pistikos
#1 Best Selling Author. Helping you accelerate your retirement with Triple Compounding™ Former engineer on a mission to help 1 million households take control of their finances. Founder & CEO of Invest Diva.
