ARII Investment Analysis Report & Stock Research, American Railcar Industries, Inc.

ARII 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 ARII through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 5 years are 1.02x and 0.37x respectively.

Utilizing this range we can see that ARII’s current Price to Sales per share ratio of 0.52x is significantly below its average levels historically. In fact, with a current price of $10.29, ARII is a full 26% 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 ARII.

ARII Cash Earnings

Looking at ARII specifically in their Cash Earnings capabilities, Ockham views ARII 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 5 years of cash earnings levels for ARII 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 13.66 and a 4.79 low over the same period.

Now that ARII’s current price is $10.29 and its Price to Cash Earnings ratio is 5.95, we are very positive on its outlook from the cash earnings perspective. In fact, ARII is now trading a full 36% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why ARII 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.

ARII Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

The estimated annual dividend for ARII is $0.12 producing a current dividend yield of 1.17%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from ARII 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 ARII over previous years was 2.92% while the lowest dividend yield was 0.22%. It is never a good sign for a company to pay significantly lower dividends, in this case 25.48% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.