Dynegy (DYN) is a wholesale electrical power producing company that sells electric capacity and ancillary services to utilities, cooperatives and municipalities. Dynegy has 29 power plants in 13 states producing 20,000 megawatts of electric energy. The company employs 1800 people.
The company reported in its fourth quarter earnings release that it had reduced its quarterly loss from the previous years’ level. Dynegy lost $7 million, or $.01 per share in the quarter, compared to a loss of $46 million, or $.06 per share in the fourth quarter of 2007. Analysts polled by Thomson Reuters had a consensus loss projection of $.02 per share.
Dynegy lowered its earlier projection to a loss of $65million to $140 million for fiscal year 2009. In December, the company had projected that 2009 profits would range from a positive $85 million to a loss of $20 million.
Company chairman, chief executive and president Bruce Williams said in remarks prepared for the release that there is now a greater uncertainty regarding forecasts because “…we are in a period of extreme market volatility and low commodity prices.” Because electric rates are generally set as a factor of natural gas prices, the oversupply of natural gas in the market today is depressing the price for electricity at the wholesale level.
DYN is currently trading at a price of $1.51 per share. The stock has traded in a range of $1.10 to $9.92 per share over the past 52 weeks. The low for the stock was reached on February 23.
With an average of 8 million shares traded daily over the last 6 months, Dynegy at the current price is a small cap company with market capitalization of $1.27 billion. The trading volume, however, is among the highest for a small cap stock and is an indication that the stock has a large and strong following among investors.
While the market fundamentals affecting the company are deteriorating, Dynegy is well capitalized and highly liquid, providing the company with a strong foundation with which to absorb the impact of a deteriorating economy.
Dynegy has a current ratio of 1.72, above the industry average of 1.1. The company’s debt to equity ratio is 1.31 as compared to a ratio of 1.40 for the industry. The company is also slightly less leveraged than is the case of the industry, with a leverage ratio of 3.0 versus 3.6 for the industry.
While the deteriorating fundamentals affecting the industry may be of concern to some, Dynegy’s balance sheet is favorably structured to withstand adverse economic forces.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
