The Razor's Edge

2-Year Price History

A Word Of Caution

Crosstex Energy LP (XTEX) has experienced a very significant loss in market value recently. Clearly this drop in price will have an impact on the valuation but the recent events that caused the drop may have not been fully factored into our analysis yet. When a stock loses value very quickly it could be a sign that there is a fear of bankruptcy.

Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect significant factors surrounding this company.

Therefore, (and as always), check additional sources and available information regarding XTEX before making an investment decision.

Ockham's Rating

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XTEX Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 8 years. For, XTEX the high and low end of the Price to Sales per share ratios are 0.35x and 0.25x respectively.

Notice that XTEX's current Price to Sales per share ratio is 0.02x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $4.77, XTEX is 93% below where we would expect to see it. This will beneficially factor into our final analysis of XTEX as it is not often that this stock sinks to these levels.

XTEX Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. XTEX is significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 8 years of cash earnings levels for XTEX to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 14.43 and a 10.44 low over the same period.

Now that XTEX’s current price is $4.77 and its Price to Cash Earnings ratio is 0.66, we are very positive on its outlook from the cash earnings perspective. In fact, XTEX is now trading a full 95% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why XTEX has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

XTEX Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for XTEX to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for XTEX is $2.00 producing a current dividend yield of 41.93%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from XTEX against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from XTEX over previous years was 62.70% while the lowest dividend yield was 0.00%. XTEX’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 33.75% above the median which weighs very positively on our analysis of XTEX.