NASDAQ:ERIC
$10.69
(3/19 4:00PM)
+0.3%
| Open | $10.71 |
Mkt Cap | $31.8 Billion |
| High | $10.75 |
52Wk High | $11.33 |
| Low | $10.5 |
52Wk Low | $8.10 |
| Volume | 10.2 Million |
Avg Vol 10D | 5.7 Million |
ERIC Revenue
As a value investing shop, we are interested in seeing how ERIC's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 2.60x and the low end of the range at 1.28x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for ERIC of 1.46x is significantly below its average levels historically. In fact, with a current price of $11.29, ERIC is a full 25% 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 ERIC.
ERIC Cash Earnings
Looking at ERIC specifically in their Cash Earnings capabilities, Ockham views ERIC as significantly above its historical average multiple of Cash Earnings. Looking at the last 7 years we can get a good understanding of what investors have grown to expect from ERIC. For example, ERIC's Cash Earnings ratio per share has fluctuated between 14.72 and 27.14 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where ERIC is with respect to prior business periods.
So what does this tell us about ERIC in particular? Basically, we would value the current level of Cash Earnings per share (which is at 35.28) as significantly overvalued. Just by looking at the last closing price of ERIC, which was $11.29, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded ERIC with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that ERIC may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.
ERIC 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 ERIC against the historic high and low levels over an available data range. Because ERIC has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In ERIC’s case, the estimated annual dividend is $0.23 producing a current dividend yield of 2.04%. The highest dividend yield from ERIC in recent history was 2.84% while the lowest dividend yield was 0.00%. It's hard not to notice that ERIC pays a current dividend yield that is 43.66% above the historical median. This peaks our interest since our analysis looks favorably upon dividend yields that are greater than the historical median.
