LUK Stock Report

2-Year Price History

Ockham's Rating

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LUK Revenue

As a value investing shop, we are interested in seeing how LUK'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 10 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 9.74x and the low end of the range at 5.11x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for LUK of 4.83x is well below its normal historic Price to Sales levels. At a price of $20.04, LUK is 35% 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.

LUK Cash Earnings

Price to Cash Earnings analysis is inappropriate for this company due to anticipated negative cash flows for this year. A negative cash flow presents many complications when comparing the company's current value to historically normal valuations. Clearly, when a company fails to earn a profit, it should be a concern for investors. As such, we have taken a negative view on LUK from a cash perspective. We should point out that this metric is a significant element in Ockham’s methodology for analyzing the outlook for any company. Many young companies have come through difficult times like this before; these companies have an opportunity to grow revenue appropriately to bring them around to profitablity. However, for mature company's with a history of positive cash flow this can be much more distressing. Therefore, for LUK, our overall valutaion is now more dependent on the Price to Sales analysis, and investors should be cautious with a company with very limited, if any, positive cash earnings.

LUK 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.