OC Investment Analysis Report & Stock Research, Owens Corning, Inc.

Ockham's Rating/Recommendation Summary

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OC Revenue

As a value investing shop, we are interested in seeing how OC'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 5 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 1.30x and the low end of the range at 0.64x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for OC of 0.66x is well below its normal historic Price to Sales levels. At a price of $24.80, OC is 33% 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.

OC Cash Earnings

When there is not enough positive Cash Earnings history available for a company, we at Ockham Research can find it quite difficult to actually rate their ability to generate cash. Such is the case with OC. When a company has current positive cash earnings but not enough years of history to compare it to, we find the correlation of cash earnings to valuation significantly hindered. So with OC, we will have to wait to see if there are a few more cycles of positive Cash Earnings numbers before we will be confident in our Cash Earnings analysis.

OC 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. OC 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 OC more consistent dividend history is made available, we will begin to factor this into the Ockham approach.