The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

OXY Revenue

As a value investing shop, we are interested in seeing how OXY's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 2.53x and the low end of the range at 1.53x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for OXY of 2.03x is slightly under its historical average. This level of Price to Sales gives us a fairly neutral position on the OXY shares. We would like to see a drop in the Price to Sales ratio just a little bit more (given current sales figures) before we would become more positive on a Price to Sales basis. Such a drop would increase the attractiveness of the stock but, as always, would need to be considered in the context of all other valuation factors.

OXY Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently OXY is significantly below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from OXY. For example, OXY's Cash Earnings ratio per share has fluctuated between 4.05 and 6.52 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where OXY is with respect to prior business periods.

So with OXY's current price (latest close of $62.16) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, OXY is 17% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with OXY.

OXY Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure on a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from OXY against the historic high and low levels over an available data range. Because OXY has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In OXY’s case, the estimated annual dividend is $1.28 producing a current dividend yield of 2.06%. The highest dividend yield from OXY in recent history was 6.34% while the lowest dividend yield was 1.15%. While it is quite common for a growth stock to pay no dividend at all, but for a mature company such as OXY that has a history of paying dividends it is disappointing to see their dividend yield drop so significantly. At this time, the current dividend yield is 44.99% below the median yield.