The Razor's Edge

2-Year Price History

A Word Of Caution

Atlas America Incorporated (ATLS) 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 ATLS before making an investment decision.

Ockham's Rating

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ATLS 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 6 years. For, ATLS the high and low end of the Price to Sales per share ratios are 1.28x and 0.66x respectively.

Notice that ATLS's current Price to Sales per share ratio is 0.25x, 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 $14.99, ATLS is 75% below where we would expect to see it. This will beneficially factor into our final analysis of ATLS as it is not often that this stock sinks to these levels.

ATLS Cash Earnings

Looking at ATLS specifically in their Cash Earnings capabilities, Ockham views ATLS as 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 6 years of cash earnings levels for ATLS 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 12.77 and a 6.63 low over the same period.

Now that ATLS’s current price is $14.99 and its Price to Cash Earnings ratio is 2.76, we are very positive on its outlook from the cash earnings perspective. In fact, ATLS is now trading a full 72% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why ATLS 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.

ATLS 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 ATLS against the historic high and low levels over an available data range. Because ATLS has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In ATLS’s case, the estimated annual dividend is $0.20 producing a current dividend yield of 1.33%. The highest dividend yield from ATLS in recent history was 1.82% while the lowest dividend yield was 0.00%. ATLS’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 46.15% above the median which weighs very positively on our analysis of ATLS.