NYSE:EGN
$43.03
(2/9 1:28PM)
+2.3%
| Open | $42.74 |
Mkt Cap | $3.0 Billion |
| High | $43.49 |
52Wk High | $49.16 |
| Low | $42.46 |
52Wk Low | $23.18 |
| Volume | 175,163 |
Avg Vol 10D | 460,700 |
Ockham's Rating/Recommendation Summary
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EGN Revenue
Cash earnings is the most important factor in our analysis, but it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, EGN the high and low end of the Price to Sales per share ratios are 2.78x and 1.47x respectively.
Notice that EGN's current Price to Sales per share ratio is 2.11x, which is slightly under its historical average. This level of Price to Sales gives us a fairly neutral position on the EGN shares. We would like to see a drop in the Price to Sales ratio just a little bit more (given current sales figures) before we would become more positive on a Price to Sales basis. Such a drop would increase the attractiveness of the stock but, as always, would need to be considered in the context of all other valuation factors.
EGN 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 EGN, Ockham views their current Cash Earnings as below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from EGN. For example, EGN's Cash Earnings ratio per share has fluctuated between 4.99 and 9.34 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where EGN is with respect to prior business periods.
So what does a Cash Earnings ratio below the historical norm mean for EGN? Generally, EGN'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 EGN. Remember, that the average Cash Earnings level for EGN has been 7.17, so the current Cash Earnings level of 6.26 is a positive in our view, but by no means is it overwhelming.
EGN 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 EGN against the historic high and low levels over an available data range. Because EGN has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In EGN’s case, the estimated annual dividend is $0.52 producing a current dividend yield of 1.22%. The highest dividend yield from EGN in recent history was 3.25% while the lowest dividend yield was 0.60%. With that range in mind, EGN’s current dividend yield is a full 36.62% below its median dividend yield historically. This is a negative from our perspective.
