NYSE:HBI
$22.30
(2/9 2:37PM)
+2.3%
| Open | $22.17 |
Mkt Cap | $2.1 Billion |
| High | $22.6 |
52Wk High | $26.61 |
| Low | $22.05 |
52Wk Low | $5.86 |
| Volume | 414,340 |
Avg Vol 10D | 941,700 |
Ockham's Rating/Recommendation Summary
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HBI Revenue
Cash earnings is the most important factor in our analysis, but 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 5 years. For, HBI the high and low end of the Price to Sales per share ratios are 0.79x and 0.27x respectively.
Notice that HBI's current Price to Sales per share ratio is 0.56x, which is somewhat above its historical average. As such, the current Price to Sales ratio suggests a neutral share price forecast. In order for us to become more positive about HBI we would need to see a drop in the Price to Sales ratio of 5% given current sales per share levels in order to return to its historical weighted average.
HBI Cash Earnings
As the old saying goes, "Cash is King!" We look at reported Cash Earnings, but the main emphasis of our analysis involves stripping out non-cash events such as depreciation from our cash earnings analysis. This helps us view the cash flows more clearly. Nevertheless, an analysis of Cash Earnings (both reported and otherwise) is absolutely pivotal to assessing a company's value, and currently HBI is significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for HBI, the current level of Cash Earnings compared to its historical levels helps identify where HBI 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 14.34 and a historical low Cash Earnings per share ratio of 4.77, an investor can relate where value becomes optimal.
So what does this tell us about HBI in particular? Basically, we would value the current level of Cash Earnings per share (which is at 11.60) as significantly overvalued. Just by looking at the last closing price of HBI, which was $22.97, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded HBI with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that HBI may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.
HBI 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. HBI may pay a dividend at this time; however, there is an insufficient amount of history to incorporate it into our analysis. Therefore, we are not utilizing the dividends or lack thereof in our study. As HBI more consistent dividend history is made available, we will begin to factor this into the Ockham approach.
