The Razor's Edge

2-Year Price History

CVX 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 8 years. For, CVX the high and low end of the Price to Sales per share ratios are 0.89x and 0.64x respectively.

Notice that CVX's current Price to Sales per share ratio is 0.65x, which is below its historical average only slightly. So, while not a huge positive for our analysis, we do feel it is worth noting that CVX does look a bit undervalued on a Price to Sales basis, all other factors being equal. However, if the Price to Sales ratio drops further, Ockham Research is likely to become more bullish on this stock.

CVX Cash Earnings

Looking at CVX specifically in their Cash Earnings capabilities, Ockham views CVX as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for CVX, the current level of Cash Earnings compared to its historical levels helps identify where CVX 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 7.67 and a historical low Cash Earnings per share ratio of 5.53, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for CVX? From the Ockham perspective, we are looking specifically at CVX to see if the market is recognizing the huge disparity between CVX's past stock price to Cash Earnings ratio to today's levels. At a difference of 23% 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 CVX. 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.

CVX 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 CVX 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 CVX is $2.60 producing a current dividend yield of 2.95%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from CVX 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 CVX over previous years was 4.66% while the lowest dividend yield was 0.75%. Management at CVX has encouraged us with a current dividend yield of 9.06% above the historical median.