This article series has released every month since 2015 a dashboard with aggregate industry metrics in utilities (most popular ETFs in this sector: XLU, VPU, FUTY, IDU). It has been reshuffled this month to calculate more comprehensive Value and Quality Scores.
Shortcut
If you are used to this dashboard series or if you are short of time, you can skip the first paragraphs (metrics definition and table) and go to the charts. However, reading everything once is necessary if you want to use the metrics for stock-picking purposes.
Base Metrics
We calculate the median value of five fundamental ratios for each industry: Earnings Yield ("EY"), Sales Yield ("SY"), Free Cash Flow Yield ("FY"), Return on Equity ("ROE"), and Gross Margin ("GM"). Our calculation universe includes large companies in the U.S. stock market. The five base metrics are calculated on trailing 12 months. For all of them, higher is better and negative is bad. EY, SY and FY are medians of the inverse of Price/Earnings, Price/Sales, and Price/Free Cash Flow. They are better for statistical studies than price-to-something ratios, which are unusable or non-available when "something" is close to zero or negative. For example, companies with no or negative earnings can be taken into account.
We use medians rather than averages because a median splits a set in a good half and a bad half. A capital-weighted average is less useful because it is skewed by extreme values and the largest companies. Our metrics are designed with a stock-picking mindset, not for index investing.
Value and Quality Scores
We calculate historical baselines for all metrics. They are noted respectively EYh, SYh, FYh, ROEh, GMh, and they are calculated as the averages on a look-back period of 11 years. For example, the value of EYh for water in the table below is the 11-year average of the median Earnings Yield
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