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. Cascade Microtech, Incorporated (CSCD) 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 CSCD before making an investment decision.

Ockham's Rating

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CSCD 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 CSCD through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 6 years are 2.25x and 1.36x respectively.

Utilizing this range we can see that CSCD’s current Price to Sales per share ratio of 0.35x is significantly below its average levels historically. In fact, with a current price of $2.20, CSCD is a full 81% 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 CSCD.

CSCD Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of CSCD, Ockham views their current Cash Earnings as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for CSCD, the current level of Cash Earnings compared to its historical levels helps identify where CSCD 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 43.46 and a historical low Cash Earnings per share ratio of 25.72, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for CSCD? From the Ockham perspective, we are looking specifically at CSCD to see if the market is recognizing the huge disparity between CSCD's past stock price to Cash Earnings ratio to today's levels. At a difference of 69% 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 CSCD. 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.

CSCD Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely. 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 CSCD as neutral in terms of dividends because they have no history of paying a dividend and continue to reinvest that money for growth purposes.