DE Stock Report

2-Year Price History

Ockham’s Rating

DE Revenue

As a value investing shop, we are interested in seeing how DE’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 1.17x and the low end of the range at 0.65x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for DE of 0.60x is well below its normal historic Price to Sales levels. At a price of $40.06, DE is 35% 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.

DE Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company’s value, and currently DE is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for DE, the current level of Cash Earnings compared to its historical levels helps identify where DE 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 11.11 and a historical low Cash Earnings per share ratio of 6.31, an investor can relate where value becomes optimal.

So with DE’s current price (latest close of $40.06) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, DE is 21% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn’t exist in a vacuum. So if the market doesn’t recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with DE.

DE 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 DE’s case, the estimated annual dividend is $1.12 resulting in a current dividend yield of 2.80%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from DE against the historic high and low levels over the past 10 years. The highest dividend yield from DE over this period was 4.57% while the lowest dividend yield was 1.08% Given this range, the current dividend yield for DE is below its historical median and not terribly attractive from this perspective.