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These 5 Low Price-to-Sales Stocks Can Refine Your Portfolio
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Investment in stocks after the analysis of the 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 cycle of development, 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 investors’ 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.
Caleres, Inc. (CAL - Free Report) , Silgan Holdings (SLGN - Free Report) , TravelCenters of America Inc. , DCP Midstream, LP and UFP Industries (UFPI - Free Report) are some stocks that have 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 five of the 27 stocks that qualified the screening:
Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China and Guam. It operates through Famous Footwear and Brand Portfolio segments. The company offers licensed, branded and private-label athletic, casual and dress footwear products to women, men and children. Famous Footwear offers great casual and athletic brands for the entire family, with convenient, curated and affordable collections.
Caleres’ retail shoe stores provide branded athletic, casual and dress shoes, including Nike, Skechers, adidas, Vans, Converse, Crocs, Puma, Birkenstock, New Balance, Asics, New Balance, Under Armour, Bearpaw, Timberland, Sperry, and Dr. Martens. It also provides company-owned and licensed brands, such as Dr. Scholl's Shoes, Blowfish Malibu, LifeStride, Naturalizer, Zodiac, Circus by Sam Edelman, Franco Sarto, and Ryka. CAL currently has a Zacks Rank #2 and a Value Score of A.
Silgan Holdings is a leading supplier of rigid packaging for consumer goods. Its products are used in diverse end markets. It is the largest metal-container supplier for food products in North America. The company operates 113 manufacturing facilities in North and South America, Europe, and Asia. Its product lines include steel and aluminum containers for human and pet food; custom-designed plastic containers for personal care, healthcare, pharmaceutical, household, industrial chemical, food, pet care, agricultural chemical, automotive and marine chemical products; and metal, composite and plastic closures for food and beverages.
Silgan Holdings will benefit from the ongoing strong demand in beauty, fragrance, food and beverage markets, and its efforts to improve efficiency. The acquisitions of Gateway and Unicep are expected to drive growth. The SLGN stock currently has a Value Score of B and a Zacks Rank #2. It has a long-term earnings growth rate of 5%.
TravelCenters of America operates travel centers and stand-alone restaurants in the United States and Canada. Its travel centers offer a range of products and services, including diesel fuel and gasoline, diesel exhaust fluid, truck repair and maintenance, and roadside services.
TravelCenters of America also operates full-service and quick-service restaurants, and various customer amenities. It operates restaurants under the franchise agreement. TA currently has a Value Score of A and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
DCP Midstream is a leading energy infrastructure firm. The Fortune 500 firm has a strong and sustainable business strategy, with a diversified portfolio of gathering, logistics, marketing and processing assets across nine states. 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.
Based in Denver, CO, DCP Midstream, a master limited partnership, was created in 2005. The leading midstream energy player is banking on strong fee-based earnings from its long-term contracted business related to logistics and marketing. The DCP stock currently has a Value Score of A and a Zacks Rank #2.
Grand Rapids, MI-based UFP Industries is a holding company with subsidiaries throughout North America, Europe, Asia and Australia. The company supplies wood, wood composite and other products in retail, industrial and construction markets. It has been gaining from the diversity of markets, higher organic unit sales, solid contributions from buyouts, product innovation and an improved pricing model. UFP Industries' industrial and construction segments are experiencing favorable growth trends and profitability, given normalized retail demand.
UFP Industries is poised to benefit from a solid U.S. residential market, and more demand for repair and remodeling activities. Also, buyout gains and shareholders' rewards are expected to work in its favor. The UFPI 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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These 5 Low Price-to-Sales Stocks Can Refine Your Portfolio
Investment in stocks after the analysis of the 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 cycle of development, 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 investors’ 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.
Caleres, Inc. (CAL - Free Report) , Silgan Holdings (SLGN - Free Report) , TravelCenters of America Inc. , DCP Midstream, LP and UFP Industries (UFPI - Free Report) are some stocks that have 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 five of the 27 stocks that qualified the screening:
Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China and Guam. It operates through Famous Footwear and Brand Portfolio segments. The company offers licensed, branded and private-label athletic, casual and dress footwear products to women, men and children. Famous Footwear offers great casual and athletic brands for the entire family, with convenient, curated and affordable collections.
Caleres’ retail shoe stores provide branded athletic, casual and dress shoes, including Nike, Skechers, adidas, Vans, Converse, Crocs, Puma, Birkenstock, New Balance, Asics, New Balance, Under Armour, Bearpaw, Timberland, Sperry, and Dr. Martens. It also provides company-owned and licensed brands, such as Dr. Scholl's Shoes, Blowfish Malibu, LifeStride, Naturalizer, Zodiac, Circus by Sam Edelman, Franco Sarto, and Ryka. CAL currently has a Zacks Rank #2 and a Value Score of A.
Silgan Holdings is a leading supplier of rigid packaging for consumer goods. Its products are used in diverse end markets. It is the largest metal-container supplier for food products in North America. The company operates 113 manufacturing facilities in North and South America, Europe, and Asia. Its product lines include steel and aluminum containers for human and pet food; custom-designed plastic containers for personal care, healthcare, pharmaceutical, household, industrial chemical, food, pet care, agricultural chemical, automotive and marine chemical products; and metal, composite and plastic closures for food and beverages.
Silgan Holdings will benefit from the ongoing strong demand in beauty, fragrance, food and beverage markets, and its efforts to improve efficiency. The acquisitions of Gateway and Unicep are expected to drive growth. The SLGN stock currently has a Value Score of B and a Zacks Rank #2. It has a long-term earnings growth rate of 5%.
TravelCenters of America operates travel centers and stand-alone restaurants in the United States and Canada. Its travel centers offer a range of products and services, including diesel fuel and gasoline, diesel exhaust fluid, truck repair and maintenance, and roadside services.
TravelCenters of America also operates full-service and quick-service restaurants, and various customer amenities. It operates restaurants under the franchise agreement. TA currently has a Value Score of A and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
DCP Midstream is a leading energy infrastructure firm. The Fortune 500 firm has a strong and sustainable business strategy, with a diversified portfolio of gathering, logistics, marketing and processing assets across nine states. 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.
Based in Denver, CO, DCP Midstream, a master limited partnership, was created in 2005. The leading midstream energy player is banking on strong fee-based earnings from its long-term contracted business related to logistics and marketing. The DCP stock currently has a Value Score of A and a Zacks Rank #2.
Grand Rapids, MI-based UFP Industries is a holding company with subsidiaries throughout North America, Europe, Asia and Australia. The company supplies wood, wood composite and other products in retail, industrial and construction markets. It has been gaining from the diversity of markets, higher organic unit sales, solid contributions from buyouts, product innovation and an improved pricing model. UFP Industries' industrial and construction segments are experiencing favorable growth trends and profitability, given normalized retail demand.
UFP Industries is poised to benefit from a solid U.S. residential market, and more demand for repair and remodeling activities. Also, buyout gains and shareholders' rewards are expected to work in its favor. The UFPI 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.