The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

SNP 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 10 years. For, SNP the high and low end of the Price to Sales per share ratios are 0.65x and 0.30x respectively.

Notice that SNP's current Price to Sales per share ratio is 0.26x, 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 $66.53, SNP is 46% below where we would expect to see it. This will beneficially factor into our final analysis of SNP as it is not often that this stock sinks to these levels.

SNP 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 SNP is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for SNP, the current level of Cash Earnings compared to its historical levels helps identify where SNP is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 7.24 and a historical low Cash Earnings per share ratio of 3.28, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for SNP? From the Ockham perspective, we are looking specifically at SNP to see if the market is recognizing the huge disparity between SNP's past stock price to Cash Earnings ratio to today's levels. At a difference of 43% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at SNP. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

SNP Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In SNP’s case, the estimated annual dividend is $2.01 resulting in a current dividend yield of 3.02%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from SNP against the historic high and low levels over the past 10 years. The highest dividend yield from SNP over this period was 9.11% while the lowest dividend yield was 0.00% It is never a good sign for a company to pay significantly lower dividends, in this case 33.70% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.