The Razor's Edge

2-Year Price History

A Word Of Caution

Cemex SAB de CV ADS (CX) has experienced a very significant loss in market value recently. Clearly this drop in price will have an impact on the valuation but the recent events that caused the drop may have not been fully factored into our analysis yet. When a stock loses value very quickly it could be a sign that there is a fear of bankruptcy.

Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect significant factors surrounding this company.

Therefore, (and as always), check additional sources and available information regarding CX before making an investment decision.

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

CX Revenue

As a value investing shop, we are interested in seeing how CX'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 1.40x and the low end of the range at 0.77x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for CX of 0.21x is well below its normal historic Price to Sales levels. At a price of $6.95, CX is 81% 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.

CX Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of CX, Ockham views their current Cash Earnings as significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for CX 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 7.78 and a 3.79 low over the same period.

Now that CX’s current price is $6.95 and its Price to Cash Earnings ratio is 2.06, we are very positive on its outlook from the cash earnings perspective. In fact, CX is now trading a full 65% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why CX has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

CX 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. Although CX has paid a dividend in the past, they aren’t currently. Additionally, we like to look at several years of consistent dividends to add this to our analysis framework. Therefore, given this, the dividend is not currently figured into our analysis.