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7 Low Price-to-Sales Stocks for Value-Focused Investors
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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 40 stocks that qualified the screening:
Signet Jewelers Limited (SIG - Free Report) is a retailer of diamond jewelry, watches as well as other products. The company operates in the United States, Canada, U.K., the Republic of Ireland, and the Channel Islands. The company is often considered the leading retailer of diamond jewelry. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5-year EPS growth rate of 8%.
New York-based GIII Apparel Group, LTD. (GIII - Free Report) 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. G-III 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. The stock currently has a Zacks Rank #1 and a Value Score of A.
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.
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 #2 and a Value Score of A. It has a 3–5 year EPS growth rate of 1.5%.
The Mosaic Company (MOS - Free Report) is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry. It is the biggest integrated phosphate producer globally and is also among the four largest potash producers in the world. The company caters to customers across roughly 40 countries. It accounts for roughly 13% of global annual phosphate production and around 11% of global annual potash production. The stock currently has a Value Score of B and a Zacks Rank #1. It has a 3–5 year EPS growth rate of 7%.
Hibbett, Inc. (HIBB - Free Report) has evolved its offerings from sports goods to an athletic-inspired fashion-focused assortment. The company provides products for individual as well as team sports across several stores and its omni-channel platform. It focuses on providing a compelling collection of athletic-inspired fashion footwear, apparel, and accessories. The company operates predominantly in the South, Southwest, Mid-Atlantic, and Midwest regions of the United States. The stock currently has a Value Score of A and a Zacks Rank #2. The 3-5 year EPS growth rate for the stock is estimated at 22.4%.
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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7 Low Price-to-Sales Stocks for Value-Focused Investors
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 40 stocks that qualified the screening:
Signet Jewelers Limited (SIG - Free Report) is a retailer of diamond jewelry, watches as well as other products. The company operates in the United States, Canada, U.K., the Republic of Ireland, and the Channel Islands. The company is often considered the leading retailer of diamond jewelry. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5-year EPS growth rate of 8%.
New York-based GIII Apparel Group, LTD. (GIII - Free Report) 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. G-III 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. The stock currently has a Zacks Rank #1 and a Value Score of A.
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.
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 #2 and a Value Score of A. It has a 3–5 year EPS growth rate of 1.5%.
The Mosaic Company (MOS - Free Report) is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry. It is the biggest integrated phosphate producer globally and is also among the four largest potash producers in the world. The company caters to customers across roughly 40 countries. It accounts for roughly 13% of global annual phosphate production and around 11% of global annual potash production. The stock currently has a Value Score of B and a Zacks Rank #1. It has a 3–5 year EPS growth rate of 7%.
Hibbett, Inc. (HIBB - Free Report) has evolved its offerings from sports goods to an athletic-inspired fashion-focused assortment. The company provides products for individual as well as team sports across several stores and its omni-channel platform. It focuses on providing a compelling collection of athletic-inspired fashion footwear, apparel, and accessories. The company operates predominantly in the South, Southwest, Mid-Atlantic, and Midwest regions of the United States. The stock currently has a Value Score of A and a Zacks Rank #2. The 3-5 year EPS growth rate for the stock is estimated at 22.4%.
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.