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Scoop Up These 7 Low Price-to-Sales Stocks Reflecting Strength
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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 that are incurring losses or are in an early cycle of development, generating meager or no profits.
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 are paying for each dollar of revenue generated by a company.
If the price-to-sales ratio is 1, it means that 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.
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 seven of the 42 stocks that qualified the screening:
Foot Locker, Inc. (FL - Free Report) is a retailer of athletic shoes and apparel. The company operates websites and mobile apps, aligned with the brand names of store banners. In addition, Foot Locker has franchise operations in the Middle East. The company has two operating segments, North America and International. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5-year EPS growth rate of 4%.
Luxembourg-based ArcelorMittal (MT - Free Report) is the world’s leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost competitive steel plants across both the developed and developing world. It is the leader in all the main sectors — automotive, household appliances, packaging, and construction. Its steel-making operations have significant geographic diversification with roughly 38% of its crude steel produced in the Americas, 47% in Europe, and around 15% in other countries. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5 year EPS growth rate of 1.5%.
Nu Skin Enterprises, Inc. (NUS - Free Report) develops and distributes a wide range of premium cosmetics, beauty, personal care, and wellness products. While the company specializes in beauty and personal care, it also provides a wide range of nutritional products. Nu Skin’s products are available in more than 50 markets worldwide. The stock currently has a Zacks Rank #2 and a Value Score of A.
MetLife, Inc. (MET - Free Report) is an insurance-based global financial services company, providing protection and investment products to a range of individual and institutional customers. In addition to offering individual insurance, annuity, and investment products, the company provides group insurance, retirement and savings products, and services. The 3-5 year EPS growth rate for the stock is estimated at 7.5%. The stock currently has a Value Score of A and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Piper Sandler Companies (PIPR - Free Report) operates as an investment bank and institutional securities firm. It primarily serves corporations, private equity groups, public entities, non-profit entities, and institutional investors in the United States and internationally. Its products and services include financial advisory services; equity and debt capital market products; public finance services; equity research and institutional brokerage; fixed income services; and private equity strategies. The stock currently has a Value Score of B and a Zacks Rank #1.
KB Home (KBH - Free Report) is a well-known homebuilder in the United States and one of the largest in California. The company’s revenues are generated from its Homebuilding and Financial Services operations. The Homebuilding operations include building and designing homes that cater to first-time, move-up, and active adult homebuyers on acquired or developed lands. The Financial Services operations offer insurance products and title services to homebuyers. The stock currently has a Value Score of A and a Zacks Rank #2.
Standard Motor Products, Inc. (SMP - Free Report) is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. It majorly focuses on the heavy-duty industrial and original equipment market. 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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Scoop Up These 7 Low Price-to-Sales Stocks Reflecting Strength
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 that are incurring losses or are in an early cycle of development, generating meager or no profits.
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 are paying for each dollar of revenue generated by a company.
If the price-to-sales ratio is 1, it means that 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.
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 seven of the 42 stocks that qualified the screening:
Foot Locker, Inc. (FL - Free Report) is a retailer of athletic shoes and apparel. The company operates websites and mobile apps, aligned with the brand names of store banners. In addition, Foot Locker has franchise operations in the Middle East. The company has two operating segments, North America and International. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5-year EPS growth rate of 4%.
Luxembourg-based ArcelorMittal (MT - Free Report) is the world’s leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost competitive steel plants across both the developed and developing world. It is the leader in all the main sectors — automotive, household appliances, packaging, and construction. Its steel-making operations have significant geographic diversification with roughly 38% of its crude steel produced in the Americas, 47% in Europe, and around 15% in other countries. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5 year EPS growth rate of 1.5%.
Nu Skin Enterprises, Inc. (NUS - Free Report) develops and distributes a wide range of premium cosmetics, beauty, personal care, and wellness products. While the company specializes in beauty and personal care, it also provides a wide range of nutritional products. Nu Skin’s products are available in more than 50 markets worldwide. The stock currently has a Zacks Rank #2 and a Value Score of A.
MetLife, Inc. (MET - Free Report) is an insurance-based global financial services company, providing protection and investment products to a range of individual and institutional customers. In addition to offering individual insurance, annuity, and investment products, the company provides group insurance, retirement and savings products, and services. The 3-5 year EPS growth rate for the stock is estimated at 7.5%. The stock currently has a Value Score of A and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Piper Sandler Companies (PIPR - Free Report) operates as an investment bank and institutional securities firm. It primarily serves corporations, private equity groups, public entities, non-profit entities, and institutional investors in the United States and internationally. Its products and services include financial advisory services; equity and debt capital market products; public finance services; equity research and institutional brokerage; fixed income services; and private equity strategies. The stock currently has a Value Score of B and a Zacks Rank #1.
KB Home (KBH - Free Report) is a well-known homebuilder in the United States and one of the largest in California. The company’s revenues are generated from its Homebuilding and Financial Services operations. The Homebuilding operations include building and designing homes that cater to first-time, move-up, and active adult homebuyers on acquired or developed lands. The Financial Services operations offer insurance products and title services to homebuyers. The stock currently has a Value Score of A and a Zacks Rank #2.
Standard Motor Products, Inc. (SMP - Free Report) is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. It majorly focuses on the heavy-duty industrial and original equipment market. 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.