LLL Investment Analysis Report & Stock Research, L-3 Communications Holdings Inc

Ockham’s Rating/Recommendation Summary

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LLL Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at LLL through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 1.20x and 0.79x respectively.

Utilizing this range we can see that LLL’s current Price to Sales per share ratio of 0.58x is significantly below its average levels historically. In fact, with a current price of $76.25, LLL is a full 42% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for LLL.

LLL 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 LLL is 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 LLL 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 16.59 and a 11.00 low over the same period.

Now that LLL’s current price is $76.25 and its Price to Cash Earnings ratio is 7.74, we are very positive on its outlook from the cash earnings perspective. In fact, LLL is now trading a full 44% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why LLL 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.

LLL 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 LLL’s case, the estimated annual dividend is $1.40 resulting in a current dividend yield of 1.84%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from LLL against the historic high and low levels over the past 10 years. The highest dividend yield from LLL over this period was 2.45% while the lowest dividend yield was 0.00% If you are looking for some “bang for your buck” then a dividend yield of 50.20% above the historical median should be enticing. LLL receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.