RTK Stock Report

2-Year Price History

A Word Of Caution

Stocks trading for less than $1 are loosely termed "penny" stocks. Rentech, Incorporated (RTK) is selling for less than $1 per share. While we stand by our ratings methodology for long term value investors, often times "penny" stocks will be more volatile. Because many "penny" stocks are lightly traded their stock price can fluctuate because of a single large trade. Also, there is generally less analyst coverage of such "penny" stocks and thus less information from which to base our rating.

While this company may not get as much press because of its low stock price, please take a moment to look at the RazorWire feed on the right hand side of the report. Each time Rentech, Incorporated is mentioned on business television recently should be displayed. This helps to bring you up to speed on any major issues they are facing right now.

Therefore, (and as always), check additional sources and available information regarding Rentech, Incorporated before making an investment decision.

Ockham's Rating

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RTK 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, RTK the high and low end of the Price to Sales per share ratios are 18.04x and 5.84x respectively.

Notice that RTK's current Price to Sales per share ratio is 0.42x, 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 $0.51, RTK is 97% below where we would expect to see it. This will beneficially factor into our final analysis of RTK as it is not often that this stock sinks to these levels.

RTK Cash Earnings

Cash (and the ability of a company to generate it) is a pivotal analysis at Ockham Research. With RTK, we have found that we don't have as many years of positive Cash Earnings as we would like in order to run an analysis. When a company like RTK has had several years of negative Cash Earnings mixed in with their positive years, it can be difficult to really get a good analysis of their potential. At Ockham, we always advise that Cash is key to any investment, so investors should consider the lack of positive years available as a signal that other types of analysis may need to be more heavily relied upon in RTK's case.

RTK 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 of a company's inherent expectations. While we do like to see companies with healthy and growing dividends, it is not appropriate for all companies, especially those focused on growth. In this regard, we regard RTK as neutral because we do not have historical data for this company's dividends. We will being incorporating this into our analysis as soon as that data is available.