The Razor's Edge
2-Year Price History
Recent Price
(8/27/2008 4:04 PM)
$40.10
52-Week Price
$28.35 - $48.86
Market Capitalization
$6.9 Billion
Most Recent Dividend
$0.00
PDE 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, PDE the high and low end of the Price to Sales per share ratios are 2.40x and 1.43x respectively.
Notice that PDE's current Price to Sales per share ratio is 2.71x, which is high enough compared with historical norms of PDE to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 41% merely to return PDE to its historical average.
PDE 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. PDE 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 PDE. For example, PDE's Cash Earnings ratio per share has fluctuated between 6.33 and 10.94 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where PDE is with respect to prior business periods.
So what does a Cash Earnings ratio below the historical norm mean for PDE? Generally, PDE'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 PDE. Remember, that the average Cash Earnings level for PDE has been 8.63, so the current Cash Earnings level of 8.36 is a positive in our view, but by no means is it overwhelming.
PDE 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. As far as our investing methodology goes, it is not necessary to pay a dividend in order to get a favorable rating, so as for right now PDE gets a neutral rating for the dividend portion of the model. The company is not currently paying a dividend nor have they in the fairly recent past.
