BCH Investment Analysis Report & Stock Research, Banco de Chile ADS

BCH 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 9 years. For, BCH the high and low end of the Price to Sales per share ratios are 3.20x and 1.93x respectively.

Notice that BCH's current Price to Sales per share ratio is 6,441.00x, which is well above its historical average. This means that BCH looks relatively expensive compared to its historical Price to Sales average, and thus it is more difficult to believe that there is significant price appreciation potential. In order for the stock to become more attractive, we would like to see a decline in the Price to Sales ratio of 250810% just to return BCH to its historical average.

BCH 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 BCH is significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for BCH, the current level of Cash Earnings compared to its historical levels helps identify where BCH 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 19.13 and a historical low Cash Earnings per share ratio of 11.34, an investor can relate where value becomes optimal.

So what does this tell us about BCH in particular? Basically, we would value the current level of Cash Earnings per share (which is at 23.00) as significantly overvalued. Just by looking at the last closing price of BCH, which was $64.41, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded BCH 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 BCH 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.

BCH 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 BCH, 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. BCH’s estimated annual dividend is $2.54 resulting in a current dividend yield of 3.94%. The highest dividend yield from BCH over recent history was 13.35% while the lowest dividend yield was 1.92%. With that range in mind, BCH’s current dividend yield is a full 48.40% below its median dividend yield historically. This is a negative from our perspective.