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5 Valuable Low Price-to-Sales Stocks With Potential to Grow
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Investment in stocks after analyzing valuation metrics is 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, the price-to-sales ratio is convenient for determining the value of stocks that are incurring losses or in an early development cycle, generating meager or no profit.
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 can indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure 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. 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 a 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 analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision.
Price to Sales less than the 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 the Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than the 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 the 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 (Buy): Zacks Rank #1 (Strong Buy) or 2 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 13 stocks that qualified for the screening:
Peabody Energy is engaged in the coal mining business in countries like the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea and internationally. This St. Louis, MO-based company supplies coal primarily to electricity generators, industrial facilities and steel manufacturers. It also engages in direct and brokered trading of coal and freight-related contracts and provides transportation-related services.
The company is poised to benefit from its ongoing commitment to invest in its seaborne metallurgical portfolio. BTU’s progress on its initiatives at Shoal Creek in North Goonyella illustrates this commitment. The company is optimistic about the organic growth opportunities in the seaborne metallurgical segment. Additionally, it remains committed to reducing operating costs and maintaining disciplined capital allocation. BTU currently has a Value Score of A and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Textron is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. It also offers solutions and services for aircraft, fastening systems, and industrial products and components. Textron is known globally for its most recognizable and valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.
Apart from its strong presence in the commercial aerospace market, Textron enjoys solid demand for its varied combat-proven products as well. New product launches, solid backlog count and stable financial position are expected to boost Textron's growth trajectory. Textron has been innovating products to capture market share. TXT currently has a Value Score of A and carries a Zacks Rank #2.
PBF Energy is a leading refiner of crude. It operates with a diverse asset base consisting of six refineries. The company boasts a higher daily crude processing capacity compared to most peers. PBF’s refineries play a crucial role in meeting global energy product demand and supporting various sectors, including transportation and manufacturing.
PBF stands out as one of the most complex refining systems in the United States, enabling the production of lighter and superior-grade refined products. PBF Energy’s capacity to produce cleaner and more valuable refined products is a strategic advantage, allowing it to meet market demands for high-quality fuels and petrochemicals. This enhances its competitiveness and profitability in the refining industry. PBF currently has a Zacks Rank #2 and a Value Score of A.
Based in West Fargo, ND, Titan Machinery owns and operates a network of full-service agricultural and construction equipment stores in the United States and Europe. The company offers a diversified mix of agricultural, construction and consumer products, with dealerships in the upper Midwest. The company mainly services farmers, contractors, ranchers and commercial applicators.
Titan Machinery has been gaining from acquisitions completed in the past two years. Its construction business has been outperforming expectations, which is expected to continue throughout 2023. TITN currently has a Value Score of A and a Zacks Rank #2.
Based in Minot, ND, Centerspace is a real estate development company. It is focused on the ownership, management, acquisitions, redevelopment and development of apartment communities. It is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others.
The company is poised to benefit from cost control measures implemented at the beginning of 2023, reflecting a significant reduction in repairs and maintenance costs. The company is focusing on the smart home and smart community category, which provides the highest capital return opportunities. It currently plans the implementation of smart home technology in about 50% of its total communities by the end of 2024. CSR 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.
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5 Valuable Low Price-to-Sales Stocks With Potential to Grow
Investment in stocks after analyzing valuation metrics is 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, the price-to-sales ratio is convenient for determining the value of stocks that are incurring losses or in an early development cycle, generating meager or no profit.
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 can indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure 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. 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 a 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 analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision.
Peabody Energy (BTU - Free Report) , Textron (TXT - Free Report) , PBF Energy Inc. (PBF - Free Report) , Titan Machinery (TITN - Free Report) and Centerspace (CSR - Free Report) are some companies with a low price-to-sales ratio and the potential to offer higher returns.
Screening Parameters
Price to Sales less than the 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 the Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than the 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 the 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 (Buy): Zacks Rank #1 (Strong Buy) or 2 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 13 stocks that qualified for the screening:
Peabody Energy is engaged in the coal mining business in countries like the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea and internationally. This St. Louis, MO-based company supplies coal primarily to electricity generators, industrial facilities and steel manufacturers. It also engages in direct and brokered trading of coal and freight-related contracts and provides transportation-related services.
The company is poised to benefit from its ongoing commitment to invest in its seaborne metallurgical portfolio. BTU’s progress on its initiatives at Shoal Creek in North Goonyella illustrates this commitment. The company is optimistic about the organic growth opportunities in the seaborne metallurgical segment. Additionally, it remains committed to reducing operating costs and maintaining disciplined capital allocation. BTU currently has a Value Score of A and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Textron is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. It also offers solutions and services for aircraft, fastening systems, and industrial products and components. Textron is known globally for its most recognizable and valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.
Apart from its strong presence in the commercial aerospace market, Textron enjoys solid demand for its varied combat-proven products as well. New product launches, solid backlog count and stable financial position are expected to boost Textron's growth trajectory. Textron has been innovating products to capture market share. TXT currently has a Value Score of A and carries a Zacks Rank #2.
PBF Energy is a leading refiner of crude. It operates with a diverse asset base consisting of six refineries. The company boasts a higher daily crude processing capacity compared to most peers. PBF’s refineries play a crucial role in meeting global energy product demand and supporting various sectors, including transportation and manufacturing.
PBF stands out as one of the most complex refining systems in the United States, enabling the production of lighter and superior-grade refined products. PBF Energy’s capacity to produce cleaner and more valuable refined products is a strategic advantage, allowing it to meet market demands for high-quality fuels and petrochemicals. This enhances its competitiveness and profitability in the refining industry. PBF currently has a Zacks Rank #2 and a Value Score of A.
Based in West Fargo, ND, Titan Machinery owns and operates a network of full-service agricultural and construction equipment stores in the United States and Europe. The company offers a diversified mix of agricultural, construction and consumer products, with dealerships in the upper Midwest. The company mainly services farmers, contractors, ranchers and commercial applicators.
Titan Machinery has been gaining from acquisitions completed in the past two years. Its construction business has been outperforming expectations, which is expected to continue throughout 2023. TITN currently has a Value Score of A and a Zacks Rank #2.
Based in Minot, ND, Centerspace is a real estate development company. It is focused on the ownership, management, acquisitions, redevelopment and development of apartment communities. It is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others.
The company is poised to benefit from cost control measures implemented at the beginning of 2023, reflecting a significant reduction in repairs and maintenance costs. The company is focusing on the smart home and smart community category, which provides the highest capital return opportunities. It currently plans the implementation of smart home technology in about 50% of its total communities by the end of 2024. CSR 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.