SKYW Investment Analysis Report & Stock Research, Skywest, Inc.

Ockham's Rating/Recommendation Summary

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SKYW 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, SKYW the high and low end of the Price to Sales per share ratios are 0.93x and 0.47x respectively.

Notice that SKYW's current Price to Sales per share ratio is 0.32x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $14.75, SKYW is 56% below where we would expect to see it. This will beneficially factor into our final analysis of SKYW as it is not often that this stock sinks to these levels.

SKYW 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 SKYW 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 SKYW. For example, SKYW's Cash Earnings ratio per share has fluctuated between 3.81 and 7.43 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where SKYW is with respect to prior business periods.

So with SKYW's current price (latest close of $14.75) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, SKYW is 52% 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 SKYW.

SKYW 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.

In SKYW’s case, the estimated annual dividend is $0.16 resulting in a current dividend yield of 1.08%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from SKYW against the historic high and low levels over the past 10 years. The highest dividend yield from SKYW over this period was 1.94% while the lowest dividend yield was 0.23% SKYW is not making us feel all that confident when their current dividend yield is below the historical median by 0.46%.