An alternative measure of performance - not based on dividends, earnings growth or P/E ratios.
How to place a value on a utility company? That is the question.
The traditional models no longer work very well. Dividend discount models will not work well if utilities cut dividends and buy back stock to return capital to the shareholders. Earnings growth offers no reliable performance gauge either, as utilities acquire or divest large amounts of capital. Restructuring charges often become necessary to shift resources to their best use.
Some would rank utilities by overall efficiency. That was the approach taken in "The Fortnightly 100," but the method becomes problematic when comparing utilities that differ greatly by plant type, location and other factors. (See Public Utilities Fortnightly, Sept. 1, 1998, p. 26, and the reader letters that followed at Nov. 1, 1998, p. 30.)