DTG Investment Analysis Report & Stock Research, Dollar Thrifty Automotive Group Inc

Ockham's Rating/Recommendation Summary

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DTG Revenue

As a value investing shop, we are interested in seeing how DTG'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 0.56x and the low end of the range at 0.26x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for DTG of 0.34x is well below its normal historic Price to Sales levels. At a price of $24.25, DTG is 17% 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.

DTG 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 DTG, 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 DTG 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 2.22 and a 0.92 low over the same period.

Now that DTG’s current price is $24.25 and its Price to Cash Earnings ratio is 1.06, we are very positive on its outlook from the cash earnings perspective. In fact, DTG is now trading a full 33% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why DTG 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.

DTG 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. As of the time of this report, our data provider does not have historical data for DTG. Therefore, we are not utilizing the dividends portion in our study. So, we do not know whether DTG currently pays a dividend at present or not, we have an "expected dividend" payment listed in key fundamentals but cannot varify it.