NYSE:SUG
$22.11
(2/9 12:51PM)
+1.0%
| Open | $22.14 |
Mkt Cap | $2.7 Billion |
| High | $22.29 |
52Wk High | $23.75 |
| Low | $21.79 |
52Wk Low | $12.27 |
| Volume | 171,702 |
Avg Vol 10D | 568,800 |
Ockham's Rating/Recommendation Summary
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SUG 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, SUG the high and low end of the Price to Sales per share ratios are 1.26x and 0.80x respectively.
Notice that SUG's current Price to Sales per share ratio is 1.19x, which is well above its historical average. This means that SUG looks relatively expensive compared to its historical Price to Sales average, and thus it is more difficult to believe that there is significant price appreciation potential. In order for the stock to become more attractive, we would like to see a decline in the Price to Sales ratio of 15% just to return SUG to its historical average.
SUG Cash Earnings
Looking at SUG specifically in their Cash Earnings capabilities, Ockham views SUG 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 10 years of cash earnings levels for SUG 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 11.88 and a 7.87 low over the same period.
Now that SUG’s current price is $22.00 and its Price to Cash Earnings ratio is 6.04, we are very positive on its outlook from the cash earnings perspective. In fact, SUG is now trading a full 39% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why SUG 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.
SUG Dividends
While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.
In SUG’s case, the estimated annual dividend is $0.60 resulting in a current dividend yield of 2.73%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from SUG against the historic high and low levels over the past 10 years. The highest dividend yield from SUG over this period was 5.65% while the lowest dividend yield was 0.00% The current dividend yield is below the historical median, which is slightly off-putting. We are a bit adverse to SUG from this valuation metric.
