The Razor's Edge

2-Year Price History

Ockham's Rating

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RRC Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at RRC through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 6.38x and 2.92x respectively.

Utilizing this range we can see that RRC’s current Price to Sales per share ratio of 4.26x is somewhat below its historical weighted average by 9%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

RRC 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 RRC, Ockham views their current Cash Earnings as 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 RRC 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 12.93 and a 5.94 low over the same period.

At its current price of $41.47, the Price to Cash Earnings ratio of 9.28 per share for RRC is relatively attractive. At current profitability levels, a drop in share price would only improve our future expectations. Again, Cash Earnings is an incredibly valuable metric, and management at RRC must continue on its generation to improve our overall outlook for the stock.

RRC Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

When reviewing dividend yields for RRC, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. RRC’s estimated annual dividend is $0.16 resulting in a current dividend yield of 0.39%. The highest dividend yield from RRC over recent history was 0.67% while the lowest dividend yield was 0.00%. If you are looking for some “bang for your buck” then a dividend yield of 16.42% above the historically median should be enticing. RRC receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.