In this week’s content analysis, we’re taking a look at a transaction we made this week (March 2nd) in rebalancing the US-Large model portfolio. One of the companies sold is UGI Corp (UGI), a holding company with businesses focused on providing distribution, transportation, marketing and storage services for natural gas and other energy products. 
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One of the principal factors influencing the decision to sell was the important drop in UGI’s SPScore—moving from 65% at the end of November, to just 51% as of March 2nd, barely above our tolerance limit of 50%. We’ll note the company’s Intrinsic Value, falling from $47.30 to $28.86 over the same period, and for the first time dropping below current share price, as one of the main factors leading to this degradation in SPScore. The P/IV ratio of 1.15, as of March 2nd, is considered fairly high, particularly for a public services company showing declining economic performance.
UGI’s future growth value (FGV) paints the same portrait. Displaying a premium of 22.6% (March 2nd), the FGV has been positive for the past 2 quarters. As with its P/IV, this premium is considered high given the company’s inability to grow its current operating value over the past 12 months (see dark red portion of FGV graph). It would be more palatable to pay a premium on FGV when considering a company with positive and stable current operating value growth, neither of which UGI offers.
Keeping an eye on overall economic performance, we’ll also note that EVA has dropped significantly over the past 12 months. It’s the first time in five years that UGI has been unable to generate a positive EVA in its Q1 operations (see annotations to quarterly EVA graph).
Finally, given worrying trends in EVA, Intrinsic Value, and most other main metrics, we believe that the drop in UGI share price since December is justified, and that the risk of further drops will remain high until UGI Corp is able to re-establish stability in the above noted indicators.
