AVX Investment Analysis Report & Stock Research, AVX Corp.

Ockham's Rating/Recommendation Summary

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AVX 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 AVX through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 2.30x and 1.36x respectively.

Utilizing this range we can see that AVX’s current Price to Sales per share ratio of 1.90x is somewhat above its historical average. As such, the current Price to Sales ratio suggests a neutral share price forecast. In order for us to become more positive about AVX we would need to see a drop in the Price to Sales ratio of 3% given current sales per share levels in order to return to its historical weighted average.

AVX 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 AVX is 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 10 years of cash earnings levels for AVX 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 20.38 and a 11.96 low over the same period.

So what does a Cash Earnings ratio below the historical norm mean for AVX? Generally, AVX's investors have paid slightly higher stock prices for this level of Cash Earnings, which bodes well as a return to historical norms is statistically likely. However, it is never a guarantee that history gives us proper direction, particularly in fluctuating market cycles. So by utilizing a long term view and incorporating other areas of analysis (like Sales, Dividends, and management analysis), each investor can gain a more complete view of AVX. Remember, that the average Cash Earnings level for AVX has been 16.17, so the current Cash Earnings level of 14.99 is a positive in our view, but by no means is it overwhelming.

AVX Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from AVX against the historic high and low levels over an available data range. Because AVX has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In AVX’s case, the estimated annual dividend is $0.16 producing a current dividend yield of 1.19%. The highest dividend yield from AVX in recent history was 2.25% while the lowest dividend yield was 0.59%. While it is quite common for a growth stock to pay no dividend at all, but for a mature company such as AVX that has a history of paying dividends it is disappointing to see their dividend yield drop so significantly. At this time, the current dividend yield is 16.20% below the median yield.