The Razor's Edge

2-Year Price History

Ockham's Rating

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K 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 K 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 1.84x and 1.45x respectively.

Utilizing this range we can see that K’s current Price to Sales per share ratio of 1.27x is significantly below its average levels historically. In fact, with a current price of $43.43, K is a full 23% 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 K.

K Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. K is significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for K to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 14.51 and a 11.47 low over the same period.

Now that K’s current price is $43.43 and its Price to Cash Earnings ratio is 10.17, we are very positive on its outlook from the cash earnings perspective. In fact, K is now trading a full 22% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why K has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

K 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.

When reviewing dividend yields for K, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. K’s estimated annual dividend is $1.36 resulting in a current dividend yield of 3.13%. The highest dividend yield from K over recent history was 4.82% while the lowest dividend yield was 2.11%. The current dividend yield is below the historical median, which is slightly off-putting. We are a bit adverse to K from this valuation metric.