The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

AVID Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at AVID through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 2.77x and 1.41x respectively.

Utilizing this range we can see that AVID’s current Price to Sales per share ratio of 0.51x is significantly below its average levels historically. In fact, with a current price of $11.63, AVID is a full 76% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for AVID.

AVID 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 AVID is significantly 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 AVID. For example, AVID's Cash Earnings ratio per share has fluctuated between 26.74 and 49.10 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where AVID is with respect to prior business periods.

So with AVID's current price (latest close of $11.63) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, AVID is 84% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with AVID.

AVID 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. While we do like to see companies with healthy and growing dividends, it is not appropriate for all companies, especially those focused on growth. We regard AVID as neutral in terms of dividends because they have no history of paying a dividend and continue to reinvest that money for growth purposes.