NASDAQ:HSTM
$4.75
(4/16 4:00PM)
+4.2%
| Open | $4.6 |
Mkt Cap | $99.2 Million |
| High | $4.88 |
52Wk High | $5.53 |
| Low | $4.5 |
52Wk Low | $2.17 |
| Volume | 67,363 |
Avg Vol 10D | 35,600 |
A Word Of Caution
While we stand by our ratings methodology for long term value investors, sometimes smaller companies will be more volatile in terms of revenue, cash earnings, and other fundamental factors. HealthStream, Incorporated (HSTM) is such a stock. Because many micro-caps are lightly traded their stock price can fluctuate because of a single large trade. Also, there is less analyst coverage of such micro-caps and therefore less information from which to base our ratings.
While this company may not get as much press because of its small size, please take a moment to look at the RazorWire feed on the right hand side of the report. Any time HealthStream, Incorporated is mentioned on business television or influential blogs a clip of that will be displayed. This helps to bring you up to speed on any major issues they are facing right now, both positive or negative.
Therefore, (and as always), check additional sources and available information regarding HSTM before making an investment decision.
HSTM Revenue
As a value investing shop, we are interested in seeing how HSTM’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 3.00x and the low end of the range at 1.26x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for HSTM of 1.65x is well below its normal historic Price to Sales levels. At a price of $4.35, HSTM is 23% 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.
HSTM Cash Earnings
As the old saying goes, "Cash is King!" We look at reported Cash Earnings, but the main emphasis of our analysis involves stripping out non-cash events such as depreciation from our cash earnings analysis. This helps us view the cash flows more clearly. Nevertheless, an analysis of Cash Earnings (both reported and otherwise) is absolutely pivotal to assessing a company’s value, and currently HSTM is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for HSTM, the current level of Cash Earnings compared to its historical levels helps identify where HSTM 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 16.13 and a historical low Cash Earnings per share ratio of 7.54, an investor can relate where value becomes optimal.
So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for HSTM? From the Ockham perspective, we are looking specifically at HSTM to see if the market is recognizing the huge disparity between HSTM’s past stock price to Cash Earnings ratio to today’s levels. At a difference of 59% 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 HSTM. 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.
HSTM 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. As of the time of this report, our data provider does not have historical data for HSTM. Therefore, we are not utilizing the dividends portion in our study. So, we do not know whether HSTM currently pays a dividend at present or not, we have an "expected dividend" payment listed in key fundamentals but cannot varify it.
