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Get a Buoyant Portfolio With These 5 Low Price-to-Sales Stocks
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Investment in stocks after analyzing the valuation metrics is considered one of the best practices. When considering the 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 development cycle, generating meager or no profit.
What’s the 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 can indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure 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. 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 analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision.
Titan Machinery (TITN - Free Report) , Medallion Financial Corp. (MFIN - Free Report) , ePlus (PLUS - Free Report) , Charles River Associates (CRAI - Free Report) and Plains GP Holdings, L.P. (PAGP - Free Report) are some companies with a low price-to-sales ratio and the potential to offer higher returns.
Screening Parameters
Price to Sales less than the 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 the Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than the 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 the 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 15 stocks that qualified for the screening:
Based in West Fargo, ND, Titan Machinery owns and operates a network of full-service agricultural and construction equipment stores in the United States and Europe. The company offers a diversified mix of agricultural, construction, and consumer products, with dealerships in the upper Midwest. The company mainly services farmers, contractors, ranchers and commercial applicators.
Titan Machinery has been gaining from acquisitions completed in the past two years. Its construction business has been outperforming expectations, which is expected to continue throughout 2023. The TITN stock has a Value Score of B and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medallion Financial operates as a finance company in the United States. It originates and services a growing portfolio of consumer loans and mezzanine loans in various industries. Key industries served include recreation (towable RVs and marine) and home improvement (replacement roofs, swimming pools and windows).
The company has been witnessing continued growth in its consumer lending businesses. MFIN has a Value Score of A and currently sports a Zacks Rank #1.
Herndon, VA-based ePlus is a provider of information technology (IT) solutions that enable organizations to optimize their IT environment and supply-chain processes. PLUS operates in the United States and internationally. ePlus serves commercial entities, state and local governments, government contractors, and educational institutions.
PLUS is benefiting from the solid demand for its security, modern data center and networking solutions. The company is focused on driving sustainable, long-term growth by expanding its capabilities, investing in talent and capturing share in targeted high-growth market segments. It has a Value Score of B and currently flaunts a Zacks Rank #1.
Charles River is one of the leading global consulting firms. This Boston, MA-based company is engaged in providing economic, financial and management consulting services. Its professional team has helped maintain a solid reputation for premium consulting services. Charles River has a widely diversified business, with service offerings across areas of functional expertise, client base and geographical regions.
The solid international network allows Charles River to work with the world's leading professionals on multiple issues. We believe that the company’s international operations help expand its geographic footprint and contribute to the top line. CRAI currently has a Value Score of B and a Zacks Rank #2.
Houston, TX-based Plains GP is the parent company of Plain All American Pipeline L.P. It owns and operates midstream energy infrastructure in the United States and Canada. The company engages in the transportation of crude oil and NGLs on pipelines, gathering systems and trucks. The company’s recent bolt-on acquisition in the Permian, which will complement its existing geographic footprint and updates regarding its NGL segment businesses, bodes well.
Plains GP’s disciplined capital allocation positions it for growth. This is highlighted by the company’s efforts to improve the long-term durability and quality of the cash flow stream in the NGL segment by sanctioning the debottlenecking project at the Fort Sask complex and extending the duration of contracts across its NGL portfolio. The PAGP 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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Get a Buoyant Portfolio With These 5 Low Price-to-Sales Stocks
Investment in stocks after analyzing the valuation metrics is considered one of the best practices. When considering the 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 development cycle, generating meager or no profit.
What’s the 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 can indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure 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. 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 analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision.
Titan Machinery (TITN - Free Report) , Medallion Financial Corp. (MFIN - Free Report) , ePlus (PLUS - Free Report) , Charles River Associates (CRAI - Free Report) and Plains GP Holdings, L.P. (PAGP - Free Report) are some companies with a low price-to-sales ratio and the potential to offer higher returns.
Screening Parameters
Price to Sales less than the 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 the Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than the 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 the 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 15 stocks that qualified for the screening:
Based in West Fargo, ND, Titan Machinery owns and operates a network of full-service agricultural and construction equipment stores in the United States and Europe. The company offers a diversified mix of agricultural, construction, and consumer products, with dealerships in the upper Midwest. The company mainly services farmers, contractors, ranchers and commercial applicators.
Titan Machinery has been gaining from acquisitions completed in the past two years. Its construction business has been outperforming expectations, which is expected to continue throughout 2023. The TITN stock has a Value Score of B and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medallion Financial operates as a finance company in the United States. It originates and services a growing portfolio of consumer loans and mezzanine loans in various industries. Key industries served include recreation (towable RVs and marine) and home improvement (replacement roofs, swimming pools and windows).
The company has been witnessing continued growth in its consumer lending businesses. MFIN has a Value Score of A and currently sports a Zacks Rank #1.
Herndon, VA-based ePlus is a provider of information technology (IT) solutions that enable organizations to optimize their IT environment and supply-chain processes. PLUS operates in the United States and internationally. ePlus serves commercial entities, state and local governments, government contractors, and educational institutions.
PLUS is benefiting from the solid demand for its security, modern data center and networking solutions. The company is focused on driving sustainable, long-term growth by expanding its capabilities, investing in talent and capturing share in targeted high-growth market segments. It has a Value Score of B and currently flaunts a Zacks Rank #1.
Charles River is one of the leading global consulting firms. This Boston, MA-based company is engaged in providing economic, financial and management consulting services. Its professional team has helped maintain a solid reputation for premium consulting services. Charles River has a widely diversified business, with service offerings across areas of functional expertise, client base and geographical regions.
The solid international network allows Charles River to work with the world's leading professionals on multiple issues. We believe that the company’s international operations help expand its geographic footprint and contribute to the top line. CRAI currently has a Value Score of B and a Zacks Rank #2.
Houston, TX-based Plains GP is the parent company of Plain All American Pipeline L.P. It owns and operates midstream energy infrastructure in the United States and Canada. The company engages in the transportation of crude oil and NGLs on pipelines, gathering systems and trucks. The company’s recent bolt-on acquisition in the Permian, which will complement its existing geographic footprint and updates regarding its NGL segment businesses, bodes well.
Plains GP’s disciplined capital allocation positions it for growth. This is highlighted by the company’s efforts to improve the long-term durability and quality of the cash flow stream in the NGL segment by sanctioning the debottlenecking project at the Fort Sask complex and extending the duration of contracts across its NGL portfolio. The PAGP 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.