The Razor’s Edge

2-Year Price History

Ockham’s Rating

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UBS 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, UBS the high and low end of the Price to Sales per share ratios are 0.78x and 0.39x respectively.

Notice that UBS’s current Price to Sales per share ratio is 0.42x, 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 $9.05, UBS is 29% below where we would expect to see it. This will beneficially factor into our final analysis of UBS as it is not often that this stock sinks to these levels.

UBS 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 UBS is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for UBS, the current level of Cash Earnings compared to its historical levels helps identify where UBS 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 6.75 and a historical low Cash Earnings per share ratio of 4.71, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for UBS? From the Ockham perspective, we are looking specifically at UBS to see if the market is recognizing the huge disparity between UBS’s past stock price to Cash Earnings ratio to today’s levels. At a difference of 25% 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 UBS. 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.

UBS 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. Although UBS has paid a dividend in the past, they aren’t currently. Additionally, we like to look at several years of consistent dividends to add this to our analysis framework. Therefore, given this, the dividend is not currently figured into our analysis.