NASDAQ:RENT
$17.25
(2/9 3:32PM)
-0.7%
| Open | $17.48 |
Mkt Cap | $182.4 Million |
| High | $17.51 |
52Wk High | $19.82 |
| Low | $16.68 |
52Wk Low | $8.44 |
| Volume | 27,102 |
Avg Vol 10D | 26,600 |
A Word Of Caution
While we stand by our ratings methodology for long term value investors, sometimes smaller companies will be more volatile in terms of revenue, cash earnings, and other fundamental factors. Rentrak Corporation (RENT) is such a stock. Because many micro-caps are lightly traded their stock price can fluctuate because of a single large trade. Also, there is less analyst coverage of such micro-caps and therefore less information from which to base our ratings.
While this company may not get as much press because of its small size, please take a moment to look at the RazorWire feed on the right hand side of the report. Any time Rentrak Cp is mentioned on business television or influential blogs a clip of that will be displayed. This helps to bring you up to speed on any major issues they are facing right now, both positive or negative.
Therefore, (and as always), check additional sources and available information regarding RENT before making an investment decision.
Ockham's Rating/Recommendation Summary
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RENT Revenue
As a value investing shop, we are interested in seeing how RENT'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 1.77x and the low end of the range at 0.95x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for RENT of 1.87x is well above its historical average. This means that RENT looks relatively expensive compared to its historical Price to Sales average, and thus it is more difficult to believe that there is significant price appreciation potential. In order for the stock to become more attractive, we would like to see a decline in the Price to Sales ratio of 37% just to return RENT to its historical average.
RENT Cash Earnings
Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. RENT is above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for RENT, the current level of Cash Earnings compared to its historical levels helps identify where RENT 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 31.48 and a historical low Cash Earnings per share ratio of 16.49, an investor can relate where value becomes optimal.
So when we look at RENT, what does this slightly higher than historical level of Price to Cash Earnings mean? From the Ockham perspective, it basically represents that the market has a higher stock price attributed to this level of Cash Earnings than compared to normal. So while we view this as a negative from a valuation perspective, it certainly doesn't mean that RENT couldn't rapidly improve in its value from other factors or a decline in stock price. The current Price to Cash Earnings level of 25.42 is 5% above the historical norm as calculated at Ockham. So a decline in stock price, or more hopefully, an increase in RENT's Cash Earnings levels would improve our outlook for the stock.
RENT 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. RENT may pay a dividend at this time; however, there is an insufficient amount of history to incorporate it into our analysis. Therefore, we are not utilizing the dividends or lack thereof in our study. As RENT more consistent dividend history is made available, we will begin to factor this into the Ockham approach.
