The Razor’s Edge

2-Year Price History

Ockham’s Rating

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CMCSA Revenue

As a value investing shop, we are interested in seeing how CMCSA’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 2.93x and the low end of the range at 1.75x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for CMCSA of 1.15x is well below its normal historic Price to Sales levels. At a price of $14.17, CMCSA is 51% 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.

CMCSA Cash Earnings

Looking at CMCSA specifically in their Cash Earnings capabilities, Ockham views CMCSA 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 CMCSA 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 11.13 and a 6.44 low over the same period.

Now that CMCSA’s current price is $14.17 and its Price to Cash Earnings ratio is 4.22, we are very positive on its outlook from the cash earnings perspective. In fact, CMCSA is now trading a full 52% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why CMCSA 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.

CMCSA 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 CMCSA against the historic high and low levels over an available data range. Because CMCSA has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In CMCSA’s case, the estimated annual dividend is $0.25 producing a current dividend yield of 1.76%. The highest dividend yield from CMCSA in recent history was 2.72% while the lowest dividend yield was 0.00%. CMCSA’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 29.41% above the median which weighs very positively on our analysis of CMCSA.