RSG Stock Report

2-Year Price History

Ockham's Rating

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RSG 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, RSG the high and low end of the Price to Sales per share ratios are 2.11x and 1.41x respectively.

Notice that RSG's current Price to Sales per share ratio is 1.30x, 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 $23.69, RSG is 27% below where we would expect to see it. This will beneficially factor into our final analysis of RSG as it is not often that this stock sinks to these levels.

RSG 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 RSG is significantly above its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from RSG. For example, RSG's Cash Earnings ratio per share has fluctuated between 8.81 and 13.81 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where RSG is with respect to prior business periods.

So what does this tell us about RSG in particular? Basically, we would value the current level of Cash Earnings per share (which is at 14.62) as significantly overvalued. Just by looking at the last closing price of RSG, which was $23.69, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded RSG with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that RSG may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

RSG Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from RSG against the historic high and low levels over an available data range. Because RSG has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In RSG’s case, the estimated annual dividend is $0.76 producing a current dividend yield of 3.21%. The highest dividend yield from RSG in recent history was 5.05% while the lowest dividend yield was 0.00%. If you are looking for some “bang for your buck” then a dividend yield of 27.13% above the historical median should be enticing. RSG receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.