NYSE:WCG
$30.29
(3/18 4:00PM)
+0.1%
| Open | $30.14 |
Mkt Cap | $1.3 Billion |
| High | $30.99 |
52Wk High | $39.12 |
| Low | $30 |
52Wk Low | $10.86 |
| Volume | 676,603 |
Avg Vol 10D | 653,800 |
Ockham's Rating/Recommendation Summary
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WCG Revenue
As a value investing shop, we are interested in seeing how WCG's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 7 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 0.70x and the low end of the range at 0.22x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for WCG of 0.18x is well below its normal historic Price to Sales levels. At a price of $29.14, WCG is 62% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.
WCG Cash Earnings
Looking at WCG specifically in their Cash Earnings capabilities, Ockham views WCG as significantly above its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 7 years of cash earnings levels for WCG 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 37.38 and a 10.56 low over the same period.
Therefore, at the current price of $29.14 and a Price to Cash Earnings ratio of 31.00, WCG is significantly overvalued. This diminishes the attractiveness of WCG until we see either a significant increase in cash earnings or a decline in price. A decline of the Price to Cash Earnings ratio of 29% is needed just to return to the historical cash earnings multiple.
WCG 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 of a company's inherent expectations. While we do like to see companies with healthy and growing dividends, it is not appropriate for all companies, especially those focused on growth. In this regard, we regard WCG as neutral because we do not have historical data for this company's dividends. We will being incorporating this into our analysis as soon as that data is available.
