The Razor's Edge

2-Year Price History

A Word Of Caution

Oil States International, Incorporated (OIS) 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 OIS before making an investment decision.

Ockham's Rating

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OIS 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 OIS through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 9 years are 1.11x and 0.60x respectively.

Utilizing this range we can see that OIS’s current Price to Sales per share ratio of 0.38x is significantly below its average levels historically. In fact, with a current price of $20.05, OIS is a full 56% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for OIS.

OIS 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 OIS, 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 9 years of cash earnings levels for OIS 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 9.33 and a 5.01 low over the same period.

Now that OIS’s current price is $20.05 and its Price to Cash Earnings ratio is 2.71, we are very positive on its outlook from the cash earnings perspective. In fact, OIS is now trading a full 63% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why OIS 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.

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