However, we believe dividends provide a useful measure of a company’s inherent expectations.Ĭomparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from KO against the historic high and low levels over an available data range. KO DividendsĪ positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. If either, or both, of these occur, then we could see a significant gap emerge between what investors were willing to pay for in the past, and where KO is trading currently (latest close price of $43.55). Either the stock price must decline further to increase the long term buying opportunity, or the management at KO needs to earn more cash. Naturally, we would love to see a deeper value opportunity for KO, but to get there one of two things must occur (or both). With a historical average Cash Earnings ratio of 12.96, the current Cash Earnings ratio of 11.03 is a positive opportunity for value in the Ockham view. With a historical high Cash Earnings per share ratio of 15.03 and a historical low Cash Earnings per share ratio of 10.89, an investor can relate where value becomes optimal. It is incredibly important to understand that for KO, the current level of Cash Earnings compared to its historical levels helps identify where KO is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company’s value, and currently KO is below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. KO Cash EarningsĪs the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". However, if the Price to Sales ratio drops further, Ockham Research is likely to become more bullish on this stock. So, while not a huge positive for our analysis, we do feel it is worth noting that KO does look a bit undervalued on a Price to Sales basis, all other factors being equal. Notice that KO’s current Price to Sales per share ratio is 2.94x, which is below its historical average only slightly. For, KO the high and low end of the Price to Sales per share ratios are 3.74x and 2.72x respectively. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company’s stock. KO RevenueĪs 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. Looking at the ratios and multiples described below and throughout this report is the best way to evaluate the strength of KO’s current Fairly Valued rating. While there may not have been any meaningful changes in either price or earnings outlook, we still want to analyze where KO is in relationship to its historical fundamentals. Given this, we are maintaining our Fairly Valued rating. Additionally, there haven’t been significant revisions to earnings estimates for KO. Looking at KO since last week, there has been little movement in price on a percentage basis. Second, since our last report, there have been no significant adjustments in earnings expectations or guidance. Our analysis of this stock is little changed since last week’s report, but please continue reading for further justification of our Fairly Valued rating.įirst, KO increased in price by 1.94% since and this does not greatly impact our outlook. We are simply reiterating KO’s Fairly Valued rating as of this week, as KO’s sector has resisted the downturn to some extent. What can you say about this market? No one likes to see the market going down so rapidly, but in times like these value investors should be cautiously opportunistic, as the market’s decline has certainly uncovered some great bargains. So, while most of our report highlights current valuation versus historical norms as well as peer analysis, there is still more going on behind the scenes. We utilize these tools in order to get a more complete picture of the investing environment. So, we also apply a volatility studies for both the index and individual sectors.
At Ockham Research, we are always interested in understanding a company from a valuation standpoint, but even the most ardent value investor understands that there is more to the picture than simply valuation.
0 kommentar(er)
