Wednesday, April 05, 2006

WPS Resources Corp; WPS April 5, 2006

Price per share: $51.00
Market Cap (intraday): 2.05B
Trailing P/E (ttm, intraday): 12.55
Forward P/E (fye 31-Dec-07) 1: 12.06
PEG Ratio (5 yr expected): 2.68
Price/Sales (ttm): 0.29
Price/Book (mrq): 1.56
Enterprise Value/Revenue (ttm)3: 0.45
Enterprise Value/EBITDA (ttm)3: 7.629

Profit Margin (ttm): 2.26%
Operating Margin (ttm): 2.64%

Return on Assets (ttm): 2.66%
Return on Equity (ttm): 13.27%


Total Cash / Investments = $0.03B
Total Liabilities = $4.099B (including Account Payable)

Enterprise Value (EV)
= Market Cap + Total Liabilities – Total Cash/Investments
= $2.05B + $4.099B - $0.03B
= $6.119B

Free Cash Flow (FCF)
= Negative for the last 3 years consecutively.

I received an email asking for my opinion regarding WPS Resources Corp.

So, what does WPS Resources Corp do?

WPS Resources Corporation, through its subsidiaries, operates in the energy and energy related businesses. It generates and distributes electric energy in northeastern Wisconsin, as well as provides electric energy to various customers, including municipal utilities, electric cooperatives, energy marketers, other investor-owned utilities and municipal joint action agencies in Michigan's Upper Peninsula. The company also distributes regulated natural gas to nearly 300 municipalities in northeastern Wisconsin and adjacent portions of Michigan's Upper Peninsula. In addition, WPS Resources provides energy management and consulting services to retail and wholesale customers primarily in the northeastern quadrant of the United States and adjacent portions of Canada. The company was founded in 1883 and is based in Green Bay, Wisconsin. From

What I don’t like about WPS Resources Corp?

This company has very small margin, low ROA and ROE. Also, I don’t like companies that don’t generate Free Cash Flow. For the last 3 years, it has negative free cash flow.


I would avoid this capital intensive company, which has low margin, ROA and ROE.

Let me end my thoughts with another Warren Buffett’s quote……

“Before looking at new investments, we consider adding to old ones. If a business is attractive enough to buy once, it may well pay to repeat the process.”

All the best,
Dah Hui Lau (David)

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