The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

TLM Revenue

As a value investing shop, we are interested in seeing how TLM'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 2.14x and the low end of the range at 1.35x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for TLM of 0.71x is well below its normal historic Price to Sales levels. At a price of $10.58, TLM is 60% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.

TLM Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of TLM, Ockham views their current Cash Earnings as significantly above 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 TLM. For example, TLM's Cash Earnings ratio per share has fluctuated between 7.21 and 11.01 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where TLM is with respect to prior business periods.

So what does this tell us about TLM in particular? Basically, we would value the current level of Cash Earnings per share (which is at 14.05) as significantly overvalued. Just by looking at the last closing price of TLM, which was $10.58, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded TLM with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that TLM may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

TLM Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

When reviewing dividend yields for TLM, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. TLM’s estimated annual dividend is $0.16 resulting in a current dividend yield of 1.51%. The highest dividend yield from TLM over recent history was 2.49% while the lowest dividend yield was 0.00%. TLM’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 21.29% above the median which weighs very positively on our analysis of TLM.