The Razor's Edge

2-Year Price History

Ockham's Rating

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TSO 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 10 years. For, TSO the high and low end of the Price to Sales per share ratios are 0.30x and 0.15x respectively.

Notice that TSO's current Price to Sales per share ratio is 0.07x, 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 $13.79, TSO is 68% below where we would expect to see it. This will beneficially factor into our final analysis of TSO as it is not often that this stock sinks to these levels.

TSO Cash Earnings

Looking at TSO specifically in their Cash Earnings capabilities, Ockham views TSO as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for TSO, the current level of Cash Earnings compared to its historical levels helps identify where TSO 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 13.35 and a historical low Cash Earnings per share ratio of 6.90, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for TSO? From the Ockham perspective, we are looking specifically at TSO to see if the market is recognizing the huge disparity between TSO's past stock price to Cash Earnings ratio to today's levels. At a difference of 77% 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 TSO. 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.

TSO 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.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from TSO against the historic high and low levels over an available data range. Because TSO has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In TSO’s case, the estimated annual dividend is $0.40 producing a current dividend yield of 2.90%. The highest dividend yield from TSO in recent history was 5.96% while the lowest dividend yield was 0.00%. TSO is not making us feel all that confident when their current dividend yield is below the historical median by 2.68%.