The Razor's Edge

2-Year Price History

A Word Of Caution

While, we stand by our ratings methodology for long term value investors, sometimes smaller companies will be more volatile in terms of revenue, cash earnings, and other fundamental factors. Bolt Technology Corporation (BOLT) is such a stock. Because many micro-caps are lightly traded their stock price can fluctuate because of a single large trade. Also, there is less analyst coverage of such micro-caps and therefore less information from which to base our ratings.

Therefore, (and as always), check additional sources and available information regarding BOLT before making an investment decision.

Ockham's Rating

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BOLT Revenue

As a value investing shop, we are interested in seeing how BOLT's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 3.54x and the low end of the range at 1.35x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for BOLT of 1.17x is well below its normal historic Price to Sales levels. At a price of $7.82, BOLT is 53% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.

BOLT Cash Earnings

Looking at BOLT specifically in their Cash Earnings capabilities, Ockham views BOLT as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for BOLT, the current level of Cash Earnings compared to its historical levels helps identify where BOLT 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 28.56 and a historical low Cash Earnings per share ratio of 14.05, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for BOLT? From the Ockham perspective, we are looking specifically at BOLT to see if the market is recognizing the huge disparity between BOLT's past stock price to Cash Earnings ratio to today's levels. At a difference of 78% 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 BOLT. 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.

BOLT 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. 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 BOLT as neutral in terms of dividends because they have no history of paying a dividend and continue to reinvest that money for growth purposes.