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Buy These 5 Low Price-to-Sales Stocks for Solid Portfolio Gains
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Investment in stocks made after an analysis of valuation metrics is usually considered one of the best practices. When considering valuation metrics, the price-to-earnings ratio has always been the obvious choice. This is because calculations based on earnings are easy and come in handy. However, price-to-sales has emerged as a convenient tool to determine the value of stocks incurring losses or are in an early cycle of development, generating meager or no profits.
What’s Price-to-Sales Ratio?
While a loss-making company with a negative price-to-earnings ratio falls out of investor favor, its price-to-sales could indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure that a company's growth is not overvalued.
A stock’s price-to-sales ratio reflects how much investors pay for each dollar of revenue generated by a company.
If the price-to-sales ratio is 1, investors are paying $1 for every $1 of revenues generated by the company. So, a stock with a price-to-sales below 1 is a good bargain as investors need to pay less than a dollar for a dollar’s worth.
Thus, a stock with a lower price-to-sales ratio is a more suitable investment than a stock with a high price-to-sales ratio.
The price-to-sales ratio is often preferred over price-to-earnings as companies can manipulate their earnings using various accounting measures. However, sales are harder to manipulate and are relatively reliable.
However, one should keep in mind that a company with high debt and a low price-to-sales ratio is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance, a rise in market cap, and ultimately a higher price-to-sales ratio.
In any case, the price-to-sales ratio used in isolation cannot do the trick. One should also analyze other ratios like Price/Earnings, Price/Book, and Debt/Equity before arriving at any investment decision.
G-III Apparel, Ltd. (GIII - Free Report) , Signet Jewelers (SIG - Free Report) , Standard Motor Products (SMP - Free Report) , Marathon Oil Corp. (MRO - Free Report) and Ryder System (R - Free Report) are some stocks that have a low price-to-sales ratio and the potential to offer higher returns.
Screening Parameters
Price to Sales less than Median Price to Sales for its Industry: The lower the price-to-sales ratio, the better.
Price to Earnings using F(1) estimate less than Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than Median Price to Book for its Industry: This is another parameter to ensure the value feature of a stock.
Debt to Equity (Most Recent) less than Median Debt to Equity for its Industry: A company with less debt should have a stable price-to-sales ratio.
Current Price greater than or equal to $5: The stocks must be trading at a minimum of $5 or higher.
Zacks Rank less than or equal to #2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.
Value Score less than or equal to B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best opportunities in the value investing space.
Here are five of the 33 stocks that qualified the screening:
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. The company’s portfolio includes outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage.
This New York-based company has a portfolio of more than 30 licensed and proprietary brands, including five global major brands — DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld. G-III's owned brands include Donna Karan, DKNY, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. The stock currently has a Value Score of A and sports a Zacks Rank #1.
Signet Jewelers is a retailer of diamond jewelry, watches and other products. The company operates in the United States, Canada, the U.K., the Republic of Ireland, and the Channel Islands. Signet is often considered the leading retailer of diamond jewelry.
Signet’s Inspiring Brilliance strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, and accelerating digital commerce. SIG currently has a Value Score of A and it sports a Zacks Rank #1. It has a long-term earnings growth rate of 8%.
Long Island City, NY-based Standard Motor is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. It primarily focuses on heavy-duty industrial and the original equipment market.
Standard Motor sells products primarily to warehouse distributors like CARQUEST and NAPA Auto Parts; large retail chains such as Advance Auto Parts, Inc., AutoZone, Inc. and O’Reilly Automotive, Inc.; and national program distribution groups, such as Auto Value and All Pro/Bumper to Bumper, original equipment manufacturers (OEMs), and original equipment service part operations. The products are sold in the United States, Canada, Mexico, Europe, Asia and other countries in Latin America. SMP currently has a Value Score of A and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Oil is a leading oil and natural gas exploration and production (‘E&P’) company with operations in the United States and Africa. As of the end of 2021, Marathon Oil had approximately 1,106 million oil-equivalent barrels in net proved reserves (52% crude oil/condensate and 68% proved developed), and 89% were located in the United States. In 2021, the company’s overall production from continuing operations was 347,000 net barrels of oil equivalent per day. Approximately 82% of Marathon Oil’s 2021 volumes came from the United States.
The company’s business is organized into two segments – United States Exploration and Production, and International Exploration and Production. The stock currently has a Value Score of A and a Zacks Rank #2. It has a long-term earnings growth rate of 14.4%.
Florida-based Ryder System is recognized as one of the world's largest providers of integrated logistics and transportation solutions. Ryder’s customers range from small businesses to large international enterprises. They are drawn from a wide variety of industries, the most significant of which include automotive, electronics, transportation, grocery, lumber and wood products, foodservice and home furnishing.
Ryder is benefiting from improving economic and freight conditions in the United States. The stock currently has a Value Score of A and a Zacks Rank #2.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your trial to the Research Wizard today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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Buy These 5 Low Price-to-Sales Stocks for Solid Portfolio Gains
Investment in stocks made after an analysis of valuation metrics is usually considered one of the best practices. When considering valuation metrics, the price-to-earnings ratio has always been the obvious choice. This is because calculations based on earnings are easy and come in handy. However, price-to-sales has emerged as a convenient tool to determine the value of stocks incurring losses or are in an early cycle of development, generating meager or no profits.
What’s Price-to-Sales Ratio?
While a loss-making company with a negative price-to-earnings ratio falls out of investor favor, its price-to-sales could indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure that a company's growth is not overvalued.
A stock’s price-to-sales ratio reflects how much investors pay for each dollar of revenue generated by a company.
If the price-to-sales ratio is 1, investors are paying $1 for every $1 of revenues generated by the company. So, a stock with a price-to-sales below 1 is a good bargain as investors need to pay less than a dollar for a dollar’s worth.
Thus, a stock with a lower price-to-sales ratio is a more suitable investment than a stock with a high price-to-sales ratio.
The price-to-sales ratio is often preferred over price-to-earnings as companies can manipulate their earnings using various accounting measures. However, sales are harder to manipulate and are relatively reliable.
However, one should keep in mind that a company with high debt and a low price-to-sales ratio is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance, a rise in market cap, and ultimately a higher price-to-sales ratio.
In any case, the price-to-sales ratio used in isolation cannot do the trick. One should also analyze other ratios like Price/Earnings, Price/Book, and Debt/Equity before arriving at any investment decision.
G-III Apparel, Ltd. (GIII - Free Report) , Signet Jewelers (SIG - Free Report) , Standard Motor Products (SMP - Free Report) , Marathon Oil Corp. (MRO - Free Report) and Ryder System (R - Free Report) are some stocks that have a low price-to-sales ratio and the potential to offer higher returns.
Screening Parameters
Price to Sales less than Median Price to Sales for its Industry: The lower the price-to-sales ratio, the better.
Price to Earnings using F(1) estimate less than Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than Median Price to Book for its Industry: This is another parameter to ensure the value feature of a stock.
Debt to Equity (Most Recent) less than Median Debt to Equity for its Industry: A company with less debt should have a stable price-to-sales ratio.
Current Price greater than or equal to $5: The stocks must be trading at a minimum of $5 or higher.
Zacks Rank less than or equal to #2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.
Value Score less than or equal to B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best opportunities in the value investing space.
Here are five of the 33 stocks that qualified the screening:
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. The company’s portfolio includes outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage.
This New York-based company has a portfolio of more than 30 licensed and proprietary brands, including five global major brands — DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld. G-III's owned brands include Donna Karan, DKNY, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. The stock currently has a Value Score of A and sports a Zacks Rank #1.
Signet Jewelers is a retailer of diamond jewelry, watches and other products. The company operates in the United States, Canada, the U.K., the Republic of Ireland, and the Channel Islands. Signet is often considered the leading retailer of diamond jewelry.
Signet’s Inspiring Brilliance strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, and accelerating digital commerce. SIG currently has a Value Score of A and it sports a Zacks Rank #1. It has a long-term earnings growth rate of 8%.
Long Island City, NY-based Standard Motor is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. It primarily focuses on heavy-duty industrial and the original equipment market.
Standard Motor sells products primarily to warehouse distributors like CARQUEST and NAPA Auto Parts; large retail chains such as Advance Auto Parts, Inc., AutoZone, Inc. and O’Reilly Automotive, Inc.; and national program distribution groups, such as Auto Value and All Pro/Bumper to Bumper, original equipment manufacturers (OEMs), and original equipment service part operations. The products are sold in the United States, Canada, Mexico, Europe, Asia and other countries in Latin America. SMP currently has a Value Score of A and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Oil is a leading oil and natural gas exploration and production (‘E&P’) company with operations in the United States and Africa. As of the end of 2021, Marathon Oil had approximately 1,106 million oil-equivalent barrels in net proved reserves (52% crude oil/condensate and 68% proved developed), and 89% were located in the United States. In 2021, the company’s overall production from continuing operations was 347,000 net barrels of oil equivalent per day. Approximately 82% of Marathon Oil’s 2021 volumes came from the United States.
The company’s business is organized into two segments – United States Exploration and Production, and International Exploration and Production. The stock currently has a Value Score of A and a Zacks Rank #2. It has a long-term earnings growth rate of 14.4%.
Florida-based Ryder System is recognized as one of the world's largest providers of integrated logistics and transportation solutions. Ryder’s customers range from small businesses to large international enterprises. They are drawn from a wide variety of industries, the most significant of which include automotive, electronics, transportation, grocery, lumber and wood products, foodservice and home furnishing.
Ryder is benefiting from improving economic and freight conditions in the United States. The stock currently has a Value Score of A and a Zacks Rank #2.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your trial to the Research Wizard today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.