HMIN Investment Analysis Report & Stock Research, Home Inns & Hotels Management, Inc.

HMIN Revenue

As a value investing shop, we are interested in seeing how HMIN'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 5 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 10.84x and the low end of the range at 2.80x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for HMIN of 3.41x is well below its normal historic Price to Sales levels. At a price of $32.77, HMIN is 50% 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.

HMIN Cash Earnings

As the old saying goes, "Cash is King!" We look at reported Cash Earnings, but the main emphasis of our analysis involves stripping out non-cash events such as depreciation from our cash earnings analysis. This helps us view the cash flows more clearly. Nevertheless, an analysis of Cash Earnings (both reported and otherwise) is absolutely pivotal to assessing a company's value, and currently HMIN is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for HMIN, the current level of Cash Earnings compared to its historical levels helps identify where HMIN 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 53.62 and a historical low Cash Earnings per share ratio of 20.94, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for HMIN? From the Ockham perspective, we are looking specifically at HMIN to see if the market is recognizing the huge disparity between HMIN'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 HMIN. 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.

HMIN 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 HMIN to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. As far as our investing methodology goes, it is not necessary to pay a dividend in order to get a favorable rating, so as for right now HMIN gets a neutral rating for the dividend portion of the model. As you can see, we are not receiving historical dividend information from our data provider on HMIN at this time.