For Immediate Release
Chicago, IL – December 16, 2021 – Stocks in this week’s article are MarineMax, Inc. (
HZO Quick Quote HZO - Free Report) , Caleres Inc. ( CAL Quick Quote CAL - Free Report) , The Mosaic Company ( MOS Quick Quote MOS - Free Report) , TravelCenters of America Inc. ( TA Quick Quote TA - Free Report) and Standard Motor Products, Inc. ( SMP Quick Quote SMP - Free Report) . 5 Stocks with Low Price-to-Sales Ratios for Higher Returns
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.
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.
MarineMax, Caleres, The Mosaic Co, TravelCenters of America and Standard Motor Products are some stocks with a low price-to-sales ratio and the potential to offer higher returns.
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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1839557/5-stocks-with-low-price-to-sales-ratio-for-higher-returns 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. About Screen of the Week
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