COGO Investment Analysis Report & Stock Research, Cogo Group, Inc.

Ockham's Rating/Recommendation Summary

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COGO 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 COGO through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 7 years are 2.56x and 1.06x respectively.

Utilizing this range we can see that COGO’s current Price to Sales per share ratio of 0.80x is significantly below its average levels historically. In fact, with a current price of $6.68, COGO is a full 56% 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 COGO.

COGO Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of COGO, Ockham views their current Cash Earnings as below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for COGO, the current level of Cash Earnings compared to its historical levels helps identify where COGO 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 32.11 and a historical low Cash Earnings per share ratio of 13.13, an investor can relate where value becomes optimal.

So what does a Cash Earnings ratio below the historical norm mean for COGO? Generally, COGO'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 COGO. Remember, that the average Cash Earnings level for COGO has been 22.62, so the current Cash Earnings level of 21.55 is a positive in our view, but by no means is it overwhelming.

COGO 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 COGO to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. COGO 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 COGO more consistent dividend history is made available, we will begin to factor this into the Ockham approach.