LIHR Investment Analysis Report & Stock Research, Lihir Gold Ltd

Ockham's Rating/Recommendation Summary

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LIHR Revenue

As a value investing shop, we are interested in seeing how LIHR'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 11.96x and the low end of the range at 5.18x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for LIHR of 5.93x is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $27.22, LIHR is 31% below where we would expect to see it. This will beneficially factor into our final analysis of LIHR as it is not often that this stock sinks to these levels.

LIHR 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. LIHR is 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 LIHR. For example, LIHR's Cash Earnings ratio per share has fluctuated between 22.82 and 47.26 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where LIHR is with respect to prior business periods.

So what does a Cash Earnings ratio below the historical norm mean for LIHR? Generally, LIHR's investors have paid slightly higher stock prices for this level of Cash Earnings, which bodes well as a return to historical norms is statistically likely. However, it is never a guarantee that history gives us proper direction, particularly in fluctuating market cycles. So by utilizing a long term view and incorporating other areas of analysis (like Sales, Dividends, and management analysis), each investor can gain a more complete view of LIHR. Remember, that the average Cash Earnings level for LIHR has been 35.04, so the current Cash Earnings level of 30.24 is a positive in our view, but by no means is it overwhelming.

LIHR 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.