The Razor’s Edge

2-Year Price History

TV Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company’s stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, TV the high and low end of the Price to Sales per share ratios are 14.23x and 8.12x respectively.

Notice that TV’s current Price to Sales per share ratio is 6.60x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $13.40, TV is 41% below where we would expect to see it. This will beneficially factor into our final analysis of TV as it is not often that this stock sinks to these levels.

TV 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 TV is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for TV, the current level of Cash Earnings compared to its historical levels helps identify where TV 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 58.72 and a historical low Cash Earnings per share ratio of 33.92, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for TV? From the Ockham perspective, we are looking specifically at TV to see if the market is recognizing the huge disparity between TV’s past stock price to Cash Earnings ratio to today’s levels. At a difference of 54% 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 TV. 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.

TV 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 TV’s case, the estimated annual dividend is $0.36 resulting in a current dividend yield of 2.69%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from TV against the historic high and low levels over the past 10 years. The highest dividend yield from TV over this period was 5.57% while the lowest dividend yield was 0.00% Given this range, the current dividend yield for TV is below its historical median and not terribly attractive from this perspective.