The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

GFI Revenue

As a value investing shop, we are interested in seeing how GFI'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 4.82x and the low end of the range at 2.50x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for GFI of 1.60x is well below its normal historic Price to Sales levels. At a price of $9.66, GFI is 57% 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.

GFI 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. GFI is 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 10 years of cash earnings levels for GFI 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 38.22 and a 22.07 low over the same period.

Now that GFI’s current price is $9.66 and its Price to Cash Earnings ratio is 7.21, we are very positive on its outlook from the cash earnings perspective. In fact, GFI is now trading a full 77% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why GFI 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.

GFI 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 GFI 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 GFI is $0.25 producing a current dividend yield of 2.59%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from GFI 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 GFI over previous years was 5.47% while the lowest dividend yield was 0.48%. Management at GFI needs to get the current dividend yield above the historical median before we are comfortable from this point of view.