NYSE:CM
$63.80
(1/15 4:00PM)
| Open | $64.66 |
Mkt Cap | $24.5 Billion |
| High | $64.77 |
52Wk High | $68.37 |
| Low | $63.8 |
52Wk Low | $28.03 |
| Volume | 18.7 Million |
Avg Vol 10D | 181,700 |
Ockham’s Rating/Recommendation Summary
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CM Revenue
As a value investing shop, we are interested in seeing how CM’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 2.13x and the low end of the range at 1.21x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for CM of 1.91x is above its historical average only slightly. So, while not a major concern it is worth noting that from a value perspective CM does not look undervalued on a Price to Sales basis. However, were the Price to Sales ratio to drop by 14% (the historical average) then we would become more positive on this stock.
CM 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 CM, Ockham views their current Cash Earnings as significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for CM, the current level of Cash Earnings compared to its historical levels helps identify where CM 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 20.33 and a historical low Cash Earnings per share ratio of 11.85, an investor can relate where value becomes optimal.
Just recall that when a stock’s price, as in the cases of CM, is significantly elevated to the level of Cash Earnings being generated, the market has already priced in much of that value. For example, the historical average for CM’s Price to Cash Earnings ratio is 39% below the current ratio of 22.46. That is not an insignificant amount, and diminishes our overall outlook on CM. However, you need to review several areas of a company’s potential, and as management would point out, one metric is not the end-all-be-all of any analysis.
CM 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 CM against the historic high and low levels over an available data range. Because CM has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In CM’s case, the estimated annual dividend is $3.32 producing a current dividend yield of 5.20%. The highest dividend yield from CM in recent history was 15.51% while the lowest dividend yield was 2.48%. It is never a good sign for a company to pay significantly lower dividends, in this case 42.19% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.
