AB Investment Analysis Report & Stock Research, AllianceBernstein Holding LP

Ockham’s Rating

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AB 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, AB the high and low end of the Price to Sales per share ratios are 25.72x and 13.98x respectively.

Notice that AB’s current Price to Sales per share ratio is 0.37x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $22.46, AB is 99% below where we would expect to see it. This will beneficially factor into our final analysis of AB as it is not often that this stock sinks to these levels.

AB 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 AB, Ockham views their current Cash Earnings as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for AB, the current level of Cash Earnings compared to its historical levels helps identify where AB 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 29.33 and a historical low Cash Earnings per share ratio of 15.93, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for AB? From the Ockham perspective, we are looking specifically at AB to see if the market is recognizing the huge disparity between AB’s past stock price to Cash Earnings ratio to today’s levels. At a difference of 32% 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 AB. 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.

AB 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 AB against the historic high and low levels over an available data range. Because AB has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In AB’s case, the estimated annual dividend is $1.64 producing a current dividend yield of 7.30%. The highest dividend yield from AB in recent history was 30.16% while the lowest dividend yield was 2.81%. While it is quite common for a growth stock to pay no dividend at all, but for a mature company such as AB that has a history of paying dividends it is disappointing to see their dividend yield drop so significantly. At this time, the current dividend yield is 55.72% below the median yield.