A key level of resistance has formed in the chart of Pinnacle West Capital (PNW) and breakout could be coming soon.
PNW is a holding company whose principal subsidiary is Arizona Public Service, which is a vertically integrated regulated utility that provides electric service to 1.3 million customers over a 35,000-square-mile service territory in Arizona. The company is benefiting from high credit ratings, which allows it to secure funds at favorable conditions.
Arizona Public Service is the largest and longest-serving electric utility provider in Arizona. The Phoenix area is seeing strong growth in commercial activities with new developments being announced. PNW expects more projects in the area with Red Bull, Ball Corporation, White Claw/Mark Anthony Brewing, Nacero, and While Stack all planning on building facilities.
The company does not have any long-term debt maturing until 2024 and has enough capital to meet its near-term obligations. PNW has a dividend yield of 3.8%, with a payout ratio of 57.8%. In terms of profitability, PNW has a solid gross margin of 44.8% and a net profit margin of 17.4%.
While sales growth over the past five years has been negative, earnings have been positive, highlighted by 19.8% growth over the past year. Revenue and earnings are expected to grow 5.0% and 3.5%, respectively, next year.
PNW is currently trading at a low multiple with a P/E of 15.4 and an EV/EBITDA of 10.6. The stock has seen short term momentum highlighted by a 15.0% one-month return. This has led to a grade of “B” for Trade Grade in our POWR Ratings system, which brings us to a technical view of the stock.
Take a look at the 1-year chart of PNW below with the added notations:
Chart of PNW provided by TradingView
PNW has formed an important level at $84 (blue) over the past year. That mark was supported before the stock broke lower in March, and it has now seen resistance many times since. PNW is currently sitting just below $84, and a break above that price could mean another leg up in the stock’s rally.
A trader could enter a long position on a break above the $84 resistance level with a stop placed under it.
Keep a close on PNW over the next couple of weeks, as the stock reports its latest quarterly results on October 30th.
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PNW shares were trading at $80.59 per share on Tuesday morning, down $0.97 (-1.19%). Year-to-date, PNW has declined -7.87%, versus a 10.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...
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