The Razor's Edge

2-Year Price History

Ockham's Rating

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BWP 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 5 years. For, BWP the high and low end of the Price to Sales per share ratios are 6.90x and 4.93x respectively.

Notice that BWP's current Price to Sales per share ratio is 4.02x, 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 $19.23, BWP is 33% below where we would expect to see it. This will beneficially factor into our final analysis of BWP as it is not often that this stock sinks to these levels.

BWP 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 BWP, 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 5 years of cash earnings levels for BWP 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 13.82 and a 9.88 low over the same period.

Now that BWP’s current price is $19.23 and its Price to Cash Earnings ratio is 7.20, we are very positive on its outlook from the cash earnings perspective. In fact, BWP is now trading a full 40% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why BWP 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.

BWP 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 BWP, 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. BWP’s estimated annual dividend is $1.90 resulting in a current dividend yield of 9.88%. The highest dividend yield from BWP over recent history was 13.57% while the lowest dividend yield was 0.00%. If you are looking for some “bang for your buck” then a dividend yield of 45.62% above the historically median should be enticing. BWP receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.