PNC Stock Report

2-Year Price History

Ockham’s Rating

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PNC Revenue

As a value investing shop, we are interested in seeing how PNC’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 2.57x 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 PNC of 1.55x is well below its normal historic Price to Sales levels. At a price of $36.89, PNC is 29% 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.

PNC Cash Earnings

Looking at PNC specifically in their Cash Earnings capabilities, Ockham views PNC as above its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from PNC. For example, PNC’s Cash Earnings ratio per share has fluctuated between 12.52 and 19.51 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where PNC is with respect to prior business periods.

So when we look at PNC, what does this slightly higher than historical level of Price to Cash Earnings mean? From the Ockham perspective, it basically represents that the market has a higher stock price attributed to this level of Cash Earnings than compared to normal. So while we view this as a negative from a valuation perspective, it certainly doesn’t mean that PNC couldn’t rapidly improve in its value from other factors or a decline in stock price. The current Price to Cash Earnings level of 16.92 is 5% above the historical norm as calculated at Ockham. So a decline in stock price, or more hopefully, an increase in PNC’s Cash Earnings levels would improve our outlook for the stock.

PNC Dividends

When determining a company’s future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn’t imperative for PNC to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for PNC is $0.40 producing a current dividend yield of 1.08%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from PNC against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from PNC over previous years was 6.67% while the lowest dividend yield was 0.45%. It is never a good sign for a company to pay significantly lower dividends, in this case 69.66% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.