ATW Investment Analysis Report & Stock Research, Atwood Oceanics, Inc.

Ockham's Rating/Recommendation Summary

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ATW Revenue

Cash earnings is the most important factor in our analysis, but 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, ATW the high and low end of the Price to Sales per share ratios are 6.16x and 3.06x respectively.

Notice that ATW's current Price to Sales per share ratio is 4.06x, which is slightly under its historical average. This level of Price to Sales gives us a fairly neutral position on the ATW 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.

ATW 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 ATW, Ockham views their current Cash Earnings 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 10 years of cash earnings levels for ATW 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 17.83 and a 9.19 low over the same period.

Now that ATW’s current price is $36.91 and its Price to Cash Earnings ratio is 7.92, we are very positive on its outlook from the cash earnings perspective. In fact, ATW is now trading a full 42% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why ATW 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.

ATW 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 ATW to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. Although they may currently pay a dividend, our data source has no historical record of it for ATW. Since we cannot apply our historical trend analysis to dividends for ATW we have a neutral score for the dividend portion of our analysis.