The Razor's Edge

2-Year Price History

Ockham's Rating

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WMI 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 WMI 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 1.49x and 1.09x respectively.

Utilizing this range we can see that WMI’s current Price to Sales per share ratio of 1.05x is significantly below its average levels historically. In fact, with a current price of $29.20, WMI is a full 19% 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 WMI.

WMI 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 WMI is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for WMI, the current level of Cash Earnings compared to its historical levels helps identify where WMI 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 8.36 and a historical low Cash Earnings per share ratio of 6.06, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for WMI? From the Ockham perspective, we are looking specifically at WMI to see if the market is recognizing the huge disparity between WMI's past stock price to Cash Earnings ratio to today's levels. At a difference of 21% 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 WMI. 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.

WMI 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 WMI’s case, the estimated annual dividend is $1.08 resulting in a current dividend yield of 3.70%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from WMI against the historic high and low levels over the past 10 years. The highest dividend yield from WMI over this period was 4.41% while the lowest dividend yield was 0.00% If you are looking for some “bang for your buck” then a dividend yield of 67.80% above the historically median should be enticing. WMI receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.