The Razor's Edge

2-Year Price History

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

RSG Revenue

As a value investing shop, we are interested in seeing how RSG'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 1.88x and the low end of the range at 1.31x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for RSG of 1.31x is well below its normal historic Price to Sales levels. At a price of $24.00, RSG is 18% 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.

RSG Cash Earnings

Looking at RSG specifically in their Cash Earnings capabilities, Ockham views RSG as significantly below 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 7.07 and 10.13 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 with RSG's current price (latest close of $24.00) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, RSG is 25% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with RSG.

RSG Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for RSG to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for RSG is $0.76 producing a current dividend yield of 3.17%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from RSG against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from RSG over previous years was 4.16% while the lowest dividend yield was 0.00%. If you are looking for some “bang for your buck” then a dividend yield of 52.40% above the historically 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.