The Razor's Edge

2-Year Price History

Ockham's Rating

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EP 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 EP 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 2.45x and 1.37x respectively.

Utilizing this range we can see that EP’s current Price to Sales per share ratio of 0.97x is significantly below its average levels historically. In fact, with a current price of $8.31, EP is a full 50% 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 EP.

EP 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. EP is significantly below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from EP. For example, EP's Cash Earnings ratio per share has fluctuated between 11.36 and 20.77 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where EP is with respect to prior business periods.

So with EP's current price (latest close of $8.31) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, EP is 85% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with EP.

EP 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 EP to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for EP is $0.20 producing a current dividend yield of 2.41%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from EP against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from EP over previous years was 7.74% while the lowest dividend yield was 0.73%. It is never a good sign for a company to pay significantly lower dividends, in this case 43.09% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.