NRG Stock Report

2-Year Price History

Ockham's Rating

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NRG Revenue

As a value investing shop, we are interested in seeing how NRG'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 6 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 1.52x 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 NRG of 0.91x is well below its normal historic Price to Sales levels. At a price of $24.80, NRG is 21% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.

NRG Cash Earnings

Looking at NRG specifically in their Cash Earnings capabilities, Ockham views NRG as significantly 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 6 years of cash earnings levels for NRG 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 8.57 and a 4.58 low over the same period.

Now that NRG’s current price is $24.80 and its Price to Cash Earnings ratio is 3.96, we are very positive on its outlook from the cash earnings perspective. In fact, NRG is now trading a full 40% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why NRG has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

NRG 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 NRG to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. Although they may currently pay a dividend, our data source has no historical record of it for NRG. Since we cannot apply our historical trend analysis to dividends for NRG we have a neutral score for the dividend portion of our analysis.