ELNK Investment Analysis Report & Stock Research, Earthlink, Inc.

ELNK Revenue

As a value investing shop, we are interested in seeing how ELNK'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 1.35x and the low end of the range at 0.78x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for ELNK of 1.29x is high enough compared with historical norms of ELNK to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 21% merely to return ELNK to its historical average.

ELNK Cash Earnings

Looking at ELNK specifically in their Cash Earnings capabilities, Ockham views ELNK as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for ELNK, the current level of Cash Earnings compared to its historical levels helps identify where ELNK 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 12.86 and a historical low Cash Earnings per share ratio of 6.66, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for ELNK? From the Ockham perspective, we are looking specifically at ELNK to see if the market is recognizing the huge disparity between ELNK's past stock price to Cash Earnings ratio to today's levels. At a difference of 70% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at ELNK. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

ELNK 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 ELNK to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from ELNK against the historic high and low levels over an available data range. Because ELNK has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In ELNK’s case, the estimated annual dividend is $0.56 producing a current dividend yield of 6.44%. The highest dividend yield from ELNK in recent history was 8.71% while the lowest dividend yield was 0.00%. If you are looking for some “bang for your buck” then a dividend yield of 47.88% above the historical median should be enticing. ELNK receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.