The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

FTI 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 9 years. For, FTI the high and low end of the Price to Sales per share ratios are 1.36x and 0.61x respectively.

Notice that FTI's current Price to Sales per share ratio is 0.56x, 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 $27.47, FTI is 43% below where we would expect to see it. This will beneficially factor into our final analysis of FTI as it is not often that this stock sinks to these levels.

FTI 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. FTI 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 9 years of cash earnings levels for FTI 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 17.27 and a 8.01 low over the same period.

Now that FTI’s current price is $27.47 and its Price to Cash Earnings ratio is 6.37, we are very positive on its outlook from the cash earnings perspective. In fact, FTI is now trading a full 50% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why FTI 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.

FTI 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 FTI to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. While we do like to see companies with healthy and growing dividends, it is not appropriate for all companies, especially those focused on growth. We regard FTI as neutral in terms of dividends because they have no history of paying a dividend and continue to reinvest that money for growth purposes.