TM Stock Report

2-Year Price History

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Ockham's Rating

TM Revenue

As a value investing shop, we are interested in seeing how TM'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 0.88x and the low end of the range at 0.58x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for TM of 0.45x is well below its normal historic Price to Sales levels. At a price of $74.09, TM is 39% 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.

TM Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently TM is significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for TM, the current level of Cash Earnings compared to its historical levels helps identify where TM 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 8.97 and a historical low Cash Earnings per share ratio of 5.85, an investor can relate where value becomes optimal.

Therefore, at the current price of $74.09 and a Price to Cash Earnings ratio of 10.85, TM is significantly overvalued. This diminishes the attractiveness of TM until we see either a significant increase in cash earnings or a decline in price. A decline of the Price to Cash Earnings ratio of 46% is needed just to return to the historical cash earnings multiple.

TM 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.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from TM against the historic high and low levels over an available data range. Because TM has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In TM’s case, the estimated annual dividend is $1.45 producing a current dividend yield of 1.96%. The highest dividend yield from TM in recent history was 4.49% while the lowest dividend yield was 0.00%. Management at TM needs to get the current dividend yield above the historical median before we are comfortable from this point of view.