We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Price-to-Sales Stocks With Scope for Handsome Returns
Read MoreHide Full Article
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.
The Aaron's Company Inc. (AAN - Free Report) , MarineMax (HZO - Free Report) , The Mosaic Company (MOS - Free Report) , Ryder System (R - Free Report) and DCP Midstream Partners are some stocks with 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 the five of the 29 stocks that qualified the screening:
Aaron's is a major omnichannel provider of lease-to-own (“LTO) and purchase solutions, mainly to underserved and credit-challenged customers. Through its various business segments, the company primarily deals in sales and lease ownership, apart from specialty retailing of furniture, home appliances, electronics, computers, and various other products and accessories.
This Atlanta, GA-based company’s business also includes Woodhaven Furniture Industries ("Woodhaven"). Woodhaven is the manufacturer and supplier of most of the bedding and a large portion of the upholstered furniture leased and sold at Aaron's company-operated and franchised stores. The stock currently has a Value Score of A and a Zacks Rank #1.
MarineMax is a recreational boat and yacht retailer in the United States. The company sells new and used recreational boats, including pleasure boats, boats, and sport cruisers; mega-yachts, sport yachts, and other yachts; fishing boats; motor and convertible yachts; pontoon boats; fishing boats; ski boats; and jet boats.
MarineMax also provides marine parts and accessories, boat covers, trailer parts, water sport accessories, high-performance accessories and a line of boating accessories. HZO currently has a Zacks Rank #1 and a Value Score of A.
Mosaic is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry. It was formed through the combination of the fertilizer businesses of agribusiness giant Cargill Incorporated and IMC Global Inc. Mosaic is the biggest integrated phosphate producer globally and is also among the four largest potash producers in the world.
MOS caters to customers across 40 countries. It accounts for roughly 13% of the global annual phosphate production and around 11% of global annual potash production. The company currently has a Zacks Rank #1 and a Value Score of B. Mosaic has a 3–5 year EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 and belong to a wide variety of industries, the most significant of which are 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 #1.
DCP Midstream is a leading energy infrastructure firm. This Fortune 500 firm has a strong and sustainable business strategy, with a diversified portfolio of gathering, logistics, marketing, and processing assets across nine states. Importantly, DCP Midstream — a master limited partnership (MLP) — was created in 2005 and has a total asset base of $17.1 billion.
DCP Midstream’s business model is designed to earn stable fee-based revenues from key midstream assets that are being utilized by shippers and customers over a long period. The leading midstream energy player is banking on strong fee-based earnings from its long-term contracted business related to logistics and marketing. DCP currently has a Value Score of B and a Zacks Rank #1.
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.
Image: Shutterstock
5 Price-to-Sales Stocks With Scope for Handsome 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.
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.
The Aaron's Company Inc. (AAN - Free Report) , MarineMax (HZO - Free Report) , The Mosaic Company (MOS - Free Report) , Ryder System (R - Free Report) and DCP Midstream Partners are some stocks with 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 the five of the 29 stocks that qualified the screening:
Aaron's is a major omnichannel provider of lease-to-own (“LTO) and purchase solutions, mainly to underserved and credit-challenged customers. Through its various business segments, the company primarily deals in sales and lease ownership, apart from specialty retailing of furniture, home appliances, electronics, computers, and various other products and accessories.
This Atlanta, GA-based company’s business also includes Woodhaven Furniture Industries ("Woodhaven"). Woodhaven is the manufacturer and supplier of most of the bedding and a large portion of the upholstered furniture leased and sold at Aaron's company-operated and franchised stores. The stock currently has a Value Score of A and a Zacks Rank #1.
MarineMax is a recreational boat and yacht retailer in the United States. The company sells new and used recreational boats, including pleasure boats, boats, and sport cruisers; mega-yachts, sport yachts, and other yachts; fishing boats; motor and convertible yachts; pontoon boats; fishing boats; ski boats; and jet boats.
MarineMax also provides marine parts and accessories, boat covers, trailer parts, water sport accessories, high-performance accessories and a line of boating accessories. HZO currently has a Zacks Rank #1 and a Value Score of A.
Mosaic is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry. It was formed through the combination of the fertilizer businesses of agribusiness giant Cargill Incorporated and IMC Global Inc. Mosaic is the biggest integrated phosphate producer globally and is also among the four largest potash producers in the world.
MOS caters to customers across 40 countries. It accounts for roughly 13% of the global annual phosphate production and around 11% of global annual potash production. The company currently has a Zacks Rank #1 and a Value Score of B. Mosaic has a 3–5 year EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 and belong to a wide variety of industries, the most significant of which are 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 #1.
DCP Midstream is a leading energy infrastructure firm. This Fortune 500 firm has a strong and sustainable business strategy, with a diversified portfolio of gathering, logistics, marketing, and processing assets across nine states. Importantly, DCP Midstream — a master limited partnership (MLP) — was created in 2005 and has a total asset base of $17.1 billion.
DCP Midstream’s business model is designed to earn stable fee-based revenues from key midstream assets that are being utilized by shippers and customers over a long period. The leading midstream energy player is banking on strong fee-based earnings from its long-term contracted business related to logistics and marketing. DCP currently has a Value Score of B and a Zacks Rank #1.
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.