The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

CRH Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, 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 10 years. For, CRH the high and low end of the Price to Sales per share ratios are 0.90x and 0.56x respectively.

Notice that CRH's current Price to Sales per share ratio is 0.36x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $22.05, CRH is 51% below where we would expect to see it. This will beneficially factor into our final analysis of CRH as it is not often that this stock sinks to these levels.

CRH Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently CRH is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for CRH, the current level of Cash Earnings compared to its historical levels helps identify where CRH 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 8.74 and a historical low Cash Earnings per share ratio of 5.39, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for CRH? From the Ockham perspective, we are looking specifically at CRH to see if the market is recognizing the huge disparity between CRH's past stock price to Cash Earnings ratio to today's levels. At a difference of 48% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at CRH. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

CRH 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.

In CRH’s case, the estimated annual dividend is $0.60 resulting in a current dividend yield of 2.72%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from CRH against the historic high and low levels over the past 10 years. The highest dividend yield from CRH over this period was 3.48% while the lowest dividend yield was 0.80% It's hard not to notice that CRH pays a current dividend yield that is 27.10% above the historical median. This peaks our interest since our analysis is looks favorably upon dividend yields that are greater than the historical median.