ATK Investment Analysis Report & Stock Research, Alliant Techsystems Inc.

Ockham's Rating/Recommendation Summary

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ATK 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 ATK 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 0.95x and 0.66x respectively.

Utilizing this range we can see that ATK’s current Price to Sales per share ratio of 0.56x is significantly below its average levels historically. In fact, with a current price of $81.30, ATK is a full 31% 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 ATK.

ATK 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 ATK is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for ATK, the current level of Cash Earnings compared to its historical levels helps identify where ATK 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 13.40 and a historical low Cash Earnings per share ratio of 9.19, an investor can relate where value becomes optimal.

So with ATK's current price (latest close of $81.30) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, ATK is 24% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with ATK.

ATK Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company. 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 ATK 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.