NRGY Investment Analysis Report & Stock Research, Inergy L.P.

NRGY Revenue

Cash earnings is the most important factor in our analysis, but it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, NRGY the high and low end of the Price to Sales per share ratios are 1.34x and 0.82x respectively.

Notice that NRGY's current Price to Sales per share ratio is 1.62x, which is well above its historical average. This means that NRGY 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 49% just to return NRGY to its historical average.

NRGY 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 NRGY is 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 NRGY. For example, NRGY's Cash Earnings ratio per share has fluctuated between 10.26 and 16.23 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where NRGY is with respect to prior business periods.

So with NRGY's current price (latest close of $37.88) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, NRGY is 24% 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 NRGY.

NRGY 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 NRGY 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 NRGY is $2.74 producing a current dividend yield of 7.23%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from NRGY 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 NRGY over previous years was 20.97% while the lowest dividend yield was 0.00%. It is never a good sign for a company to pay significantly lower dividends, in this case 31.04% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.