The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

PWR 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 PWR 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 1.29x and 0.56x respectively.

Utilizing this range we can see that PWR’s current Price to Sales per share ratio of 0.66x is significantly below its average levels historically. In fact, with a current price of $16.26, PWR is a full 30% 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 PWR.

PWR 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 PWR, 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 PWR 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 24.94 and a 11.01 low over the same period.

Now that PWR’s current price is $16.26 and its Price to Cash Earnings ratio is 9.13, we are very positive on its outlook from the cash earnings perspective. In fact, PWR is now trading a full 50% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why PWR 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.

PWR 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. While we do like to see companies with healthy and growing dividends, it is not appropriate for all companies, especially those focused on growth. We regard PWR as neutral in terms of dividends because they have no history of paying a dividend and continue to reinvest that money for growth purposes.