The Razor's Edge

2-Year Price History

A Word Of Caution

While, we stand by our ratings methodology for long term value investors, sometimes smaller companies will be more volatile in terms of revenue, cash earnings, and other fundamental factors. Cobra Electronics Corporation (COBR) is such a stock. Because many micro-caps are lightly traded their stock price can fluctuate because of a single large trade. Also, there is less analyst coverage of such micro-caps and therefore less information from which to base our ratings.

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

Ockham's Rating

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COBR 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 COBR 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 0.57x and 0.28x respectively.

Utilizing this range we can see that COBR’s current Price to Sales per share ratio of 0.05x is significantly below its average levels historically. In fact, with a current price of $1.11, COBR is a full 89% 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 COBR.

COBR Cash Earnings

Looking at COBR specifically in their Cash Earnings capabilities, Ockham views COBR as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for COBR, the current level of Cash Earnings compared to its historical levels helps identify where COBR 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 15.61 and a historical low Cash Earnings per share ratio of 7.99, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for COBR? From the Ockham perspective, we are looking specifically at COBR to see if the market is recognizing the huge disparity between COBR's past stock price to Cash Earnings ratio to today's levels. At a difference of 89% 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 COBR. 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.

COBR 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.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from COBR against the historic high and low levels over an available data range. Because COBR has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In COBR’s case, the estimated annual dividend is $0.16 producing a current dividend yield of 14.41%. The highest dividend yield from COBR in recent history was 21.33% while the lowest dividend yield was 0.00%. If you are looking for some “bang for your buck” then a dividend yield of 35.11% above the historically median should be enticing. COBR receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.