I just pick up another 1000 shares. Looking at the cash flow for the last six years (provided by S&P), the stock price is at its high at an average cash per dollar invested of around 0.17 per share and the stock price is at its low when the cash per dollar is around 0.28 per share. Using the cash generated in 2012, this equates to a price range of around $9.00 to $15.00 a share. Of course, this premise is based on this cash per dollar ratio continues in the future. However, the current price is already $1.00 below historic cash price. I believe this is a safe range to start accumulating shares. 2010 was the worst year as far as low stock price per cash goes. If the stock price reaches the highest cash per dollar invested, that translates to around a $7.00 stock price based on the 2012 cash flow. On the flip side, in 2011 the lowest cash flow would translate to a $17.70 stock price based on the 2012 cash flow. If you have access to the S&P report on WIN (5 stars at this point), the cash and low and high prices are listed.
If you look at the cash flow for the year 2009 which is based on the cash flow for 2008 but is different because it's 2009 you will see that the cash flow for 2011 went up from 2009 and also 2008 but based on the numbers and the money invested at an average of 0.17 per share and you take the square root of the share price now (7.93) and multiply that by the low of 0.28 and then add that to the same equation you would get if you ran the numbers for 2009, but not based on the 2008 numbers, and then divide by 2 you would see that no matter how many numbers you throw around this company just plain sucks.
It's not that hard to follow. Basically, I'm just looking at past 6 years of data to determine how much or how little investors are willing to pay for a particular level of cash. Based on the data, current investors require a historical high cash level for their investment dollar. This analysis doesn't guarantee future cash flows or investors sentiment. However, if you think that the company will continue their cash flow trend and that investors will require a similar level of cash per investment dollar, then it indicates the company is undervalued. This method works well on low growth, highly capitalized companies. However, I will be the first to admit that other metrics need to be looked at as well.