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5 Low Price-to-Sales Stocks to Take Advantage of Current Markets
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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 a 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.
AAR Corp. (AIR - Free Report) , SK Telecom Co. (SKM - Free Report) , ProPetro Holding Corp. (PUMP - Free Report) , Cirrus Logic Inc. (CRUS - Free Report) and First American Financial (FAF - Free Report) are some companies 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 17 stocks that qualified the screening:
AAR Corp provides various products and services to the worldwide aviation and defense industries. Its principal customers are The Boeing Company and Airbus. AIR continues to witness strong performance in its parts supply and program activities. Demand recovery in the commercial and leisure travel market should continue to contribute to its operating results positively. The latest agreement with Collins Aerospace may allow it to gain from opportunities in the jet market.
AAR Corp announced an exclusive distribution agreement with Collins Aerospace to supply de-icers and supporting products to the global aftermarket. The agreement also reflects AAR Corp’s expansion into the business jet market, thereby reaping the benefits of the growth opportunities in this space. The company expects a continued recovery in parts activities over the next several quarters. AIR currently sports a Zacks Rank #1 and has a Value Score of B.
SK Telecom is a wireless telecommunication service based in South Korea. The company has been leading growth of the mobile industry since 1984. SKM is focused on taking customer experience to new heights by extending beyond connectivity. The company’s Fixed and Mobile Telecommunications business maintains solid market leadership, while new growth businesses such as Media, Enterprise and AIVERSE have been achieving tangible results.
By placing artificial intelligence (“AI”) at the core of its business, SK Telecom is rapidly transforming into an AI company. It is focused on driving innovations in areas of telecommunications, media, AI, metaverse, cloud and connected intelligence to deliver greater value for individuals as well as enterprises. SKM has a Value Score of A and currently sports a Zacks Rank #1.
ProPetro Holding is an oilfield services provider operating primarily in the Permian Basin spread over west Texas and New Mexico. The company offers a wide spectrum of specialized, complementary services and equipment for the exploration and production of oil and natural gas. Approximately 99% of ProPetro's total revenues come from the Permian Basin. ProPetro, through its healthy leverage to the Permian Basin, is likely to benefit from this multi-year upcycle by providing hydraulic fracturing and other well-completion services to E&P firms.
ProPetro's $400 million purchase of Pioneer Natural Resources' Permian pressure pumping assets has led to a significant increase in ProPetro's horsepower base across its hydraulic fracturing fleets. The acquisition also includes a 10-year strategic service agreement encompassing approximately 30% of its total fleet. With Pioneer Natural Resources being one of the largest Permian E&P operators and still expanding in the shale play, the long-term contract is expected to provide a stable revenue base for ProPetro. The PUMP stock has a Value Score of A and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Austin, TX, Cirrus Logic is a fabless semiconductor supplier, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits (ICs). The company’s chips are used in a wide range of industrial and consumer markets, including portable and non-portable media players, smartphones, tablets, home-theater receivers, automotive entertainment systems, televisions, docking stations, and wearables, including smart watches, action cameras, smart bands and VR headsets.
Apart from this, its mixed-signal converter chips are used in energy-related applications such as digital utility meters and LED controllers for the incandescent light-bulb replacement market. Cirrus Logic is benefiting from the continued momentum across its high-performance mixed-signal and audio segments. It plans to expand its product line by investing in next-generation technology like wearables, gaming and AR/VR. CRUS plans to develop a 22-nanometer smart codec and custom-boosted amplifier to expand its footprint in the audio market. The CRUS stock currently has a Value Score of B and a Zacks Rank #2.
Santa Ana, CA-based First American Financial serves homebuyers and sellers, real estate professionals, loan originators and servicers, commercial property professionals, homebuilders, and others involved in residential and commercial property transactions with products and services specific to their needs. The company should continue to benefit from strength in the commercial business and increased demand among millennials for first-time home purchases.
First American Financial has been actively pursuing acquisitions to strengthen its core business, and expand its valuation and data businesses. It also expects increased demand among millennials for first-time home purchases. Growing direct premiums, escrow fees and agent premiums should drive the company’s revenues. Prudent capital deployment through buybacks and dividend payments bodes well. The company 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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5 Low Price-to-Sales Stocks to Take Advantage of Current Markets
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 a 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.
AAR Corp. (AIR - Free Report) , SK Telecom Co. (SKM - Free Report) , ProPetro Holding Corp. (PUMP - Free Report) , Cirrus Logic Inc. (CRUS - Free Report) and First American Financial (FAF - Free Report) are some companies 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 17 stocks that qualified the screening:
AAR Corp provides various products and services to the worldwide aviation and defense industries. Its principal customers are The Boeing Company and Airbus. AIR continues to witness strong performance in its parts supply and program activities. Demand recovery in the commercial and leisure travel market should continue to contribute to its operating results positively. The latest agreement with Collins Aerospace may allow it to gain from opportunities in the jet market.
AAR Corp announced an exclusive distribution agreement with Collins Aerospace to supply de-icers and supporting products to the global aftermarket. The agreement also reflects AAR Corp’s expansion into the business jet market, thereby reaping the benefits of the growth opportunities in this space. The company expects a continued recovery in parts activities over the next several quarters. AIR currently sports a Zacks Rank #1 and has a Value Score of B.
SK Telecom is a wireless telecommunication service based in South Korea. The company has been leading growth of the mobile industry since 1984. SKM is focused on taking customer experience to new heights by extending beyond connectivity. The company’s Fixed and Mobile Telecommunications business maintains solid market leadership, while new growth businesses such as Media, Enterprise and AIVERSE have been achieving tangible results.
By placing artificial intelligence (“AI”) at the core of its business, SK Telecom is rapidly transforming into an AI company. It is focused on driving innovations in areas of telecommunications, media, AI, metaverse, cloud and connected intelligence to deliver greater value for individuals as well as enterprises. SKM has a Value Score of A and currently sports a Zacks Rank #1.
ProPetro Holding is an oilfield services provider operating primarily in the Permian Basin spread over west Texas and New Mexico. The company offers a wide spectrum of specialized, complementary services and equipment for the exploration and production of oil and natural gas. Approximately 99% of ProPetro's total revenues come from the Permian Basin. ProPetro, through its healthy leverage to the Permian Basin, is likely to benefit from this multi-year upcycle by providing hydraulic fracturing and other well-completion services to E&P firms.
ProPetro's $400 million purchase of Pioneer Natural Resources' Permian pressure pumping assets has led to a significant increase in ProPetro's horsepower base across its hydraulic fracturing fleets. The acquisition also includes a 10-year strategic service agreement encompassing approximately 30% of its total fleet. With Pioneer Natural Resources being one of the largest Permian E&P operators and still expanding in the shale play, the long-term contract is expected to provide a stable revenue base for ProPetro. The PUMP stock has a Value Score of A and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Austin, TX, Cirrus Logic is a fabless semiconductor supplier, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits (ICs). The company’s chips are used in a wide range of industrial and consumer markets, including portable and non-portable media players, smartphones, tablets, home-theater receivers, automotive entertainment systems, televisions, docking stations, and wearables, including smart watches, action cameras, smart bands and VR headsets.
Apart from this, its mixed-signal converter chips are used in energy-related applications such as digital utility meters and LED controllers for the incandescent light-bulb replacement market. Cirrus Logic is benefiting from the continued momentum across its high-performance mixed-signal and audio segments. It plans to expand its product line by investing in next-generation technology like wearables, gaming and AR/VR. CRUS plans to develop a 22-nanometer smart codec and custom-boosted amplifier to expand its footprint in the audio market. The CRUS stock currently has a Value Score of B and a Zacks Rank #2.
Santa Ana, CA-based First American Financial serves homebuyers and sellers, real estate professionals, loan originators and servicers, commercial property professionals, homebuilders, and others involved in residential and commercial property transactions with products and services specific to their needs. The company should continue to benefit from strength in the commercial business and increased demand among millennials for first-time home purchases.
First American Financial has been actively pursuing acquisitions to strengthen its core business, and expand its valuation and data businesses. It also expects increased demand among millennials for first-time home purchases. Growing direct premiums, escrow fees and agent premiums should drive the company’s revenues. Prudent capital deployment through buybacks and dividend payments bodes well. The company 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.