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5 Low Price-to-Sales Stocks to Refine Your Investment Portfolio
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Investment in stocks after analyzing 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 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.
PagSeguro Digital (PAGS - Free Report) , Boise Cascade (BCC - Free Report) , Lakeland Industries (LAKE - Free Report) , Expro Group Holdings (XPRO - Free Report) and First Horizon (FHN - 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 (Buy): Zacks Rank #1 (Strong Buy) or 2 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 11 stocks that qualified the screening:
São Paulo, Brazil-based PagSeguro Digital provides financial technology solutions and services for micro-merchants, and small and medium-sized businesses in Brazil and internationally. The company offers multiple digital payment solutions, in-person payments via point-of-sales devices and prepaid card services. PagSeguro Digital has been diversifying its payment business and 2022 marked the consolidation of its HUBs initiative to extend its best-in-class services to small and mid-sized clients.
The company’s disciplined capital allocation has significantly aided operating and investing cash flow generation, positioning it to explore opportunities in payments and financial services in Brazil in the coming years. The PAGS stock has a Value Score of A and currently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade is one of the largest producers of engineered wood products and plywood in North America and a leading U.S. wholesale distributor of building products. BCC is progressing well with investments in its existing asset base and organic growth projects pursuing M&A that aligns with its strategy. Boise Cascade is on track with the integration efforts related to the newly acquired BROSCO facilities.
The company is focused on the execution of its strategies and has great conviction in its investments to grow. BCC currently sports a Zacks Rank #1 and has a Value Score of A.
Lakeland Industries operates as a leading global manufacturer of protective clothing for industry, healthcare and first responders on the federal, state and local levels. LAKE's focus on high-value products and market diversification, particularly in the fire service and industrial product lines, have been aiding its performance.
The company has been committed to its strategic acquisition pipeline and is focused on organic growth for the remainder of the fiscal year. LAKE currently has a Value Score of B and sports a Zacks Rank #1.
Expro is an oil and gas service company. XPRO is a leading provider of energy services, offering cost-effective, innovative solutions, and the best-in-class safety and service quality. XPRO’s wide-ranging portfolio of capabilities spans well construction, well flow management, subsea well access, and well intervention and integrity solutions.
The company’s agreement with Di Drill enables access to wider Well Intervention portfolio offerings and an open channel for the deployment of Gyro equipment. The strategic partnership formalizes and strengthens the relationship between the two energy service companies committed to providing premium well integrity solutions to complex wellbore situations. XPRO currently has a Value Score of B and a Zacks Rank #2.
Based in Memphis, TN, First Horizon is a financial services company. It provides diversified financial services, mainly via First Horizon Bank, which is its principal subsidiary. First Horizon Bank's principal divisions and subsidiaries operate under the brands First Horizon Bank, IBERIABANK, First Horizon Advisors and FHN Financial. First Horizon continues to benefit from rising loan balances, along with improving net interest income. Also, the company’s inorganic growth strategies are likely to support top-line growth.
First Horizon has been witnessing continued loan growth. We believe that the company is well-positioned to witness loan and deposit growth, with a strong business mix of regional and specialty banking franchises across its attractive, high-growth footprint. FHN’s capital distribution activities remain solid. FHN has a Value Score of B and currently flaunts 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.
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5 Low Price-to-Sales Stocks to Refine Your Investment Portfolio
Investment in stocks after analyzing 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 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.
PagSeguro Digital (PAGS - Free Report) , Boise Cascade (BCC - Free Report) , Lakeland Industries (LAKE - Free Report) , Expro Group Holdings (XPRO - Free Report) and First Horizon (FHN - 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 (Buy): Zacks Rank #1 (Strong Buy) or 2 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 11 stocks that qualified the screening:
São Paulo, Brazil-based PagSeguro Digital provides financial technology solutions and services for micro-merchants, and small and medium-sized businesses in Brazil and internationally. The company offers multiple digital payment solutions, in-person payments via point-of-sales devices and prepaid card services. PagSeguro Digital has been diversifying its payment business and 2022 marked the consolidation of its HUBs initiative to extend its best-in-class services to small and mid-sized clients.
The company’s disciplined capital allocation has significantly aided operating and investing cash flow generation, positioning it to explore opportunities in payments and financial services in Brazil in the coming years. The PAGS stock has a Value Score of A and currently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade is one of the largest producers of engineered wood products and plywood in North America and a leading U.S. wholesale distributor of building products. BCC is progressing well with investments in its existing asset base and organic growth projects pursuing M&A that aligns with its strategy. Boise Cascade is on track with the integration efforts related to the newly acquired BROSCO facilities.
The company is focused on the execution of its strategies and has great conviction in its investments to grow. BCC currently sports a Zacks Rank #1 and has a Value Score of A.
Lakeland Industries operates as a leading global manufacturer of protective clothing for industry, healthcare and first responders on the federal, state and local levels. LAKE's focus on high-value products and market diversification, particularly in the fire service and industrial product lines, have been aiding its performance.
The company has been committed to its strategic acquisition pipeline and is focused on organic growth for the remainder of the fiscal year. LAKE currently has a Value Score of B and sports a Zacks Rank #1.
Expro is an oil and gas service company. XPRO is a leading provider of energy services, offering cost-effective, innovative solutions, and the best-in-class safety and service quality. XPRO’s wide-ranging portfolio of capabilities spans well construction, well flow management, subsea well access, and well intervention and integrity solutions.
The company’s agreement with Di Drill enables access to wider Well Intervention portfolio offerings and an open channel for the deployment of Gyro equipment. The strategic partnership formalizes and strengthens the relationship between the two energy service companies committed to providing premium well integrity solutions to complex wellbore situations. XPRO currently has a Value Score of B and a Zacks Rank #2.
Based in Memphis, TN, First Horizon is a financial services company. It provides diversified financial services, mainly via First Horizon Bank, which is its principal subsidiary. First Horizon Bank's principal divisions and subsidiaries operate under the brands First Horizon Bank, IBERIABANK, First Horizon Advisors and FHN Financial. First Horizon continues to benefit from rising loan balances, along with improving net interest income. Also, the company’s inorganic growth strategies are likely to support top-line growth.
First Horizon has been witnessing continued loan growth. We believe that the company is well-positioned to witness loan and deposit growth, with a strong business mix of regional and specialty banking franchises across its attractive, high-growth footprint. FHN’s capital distribution activities remain solid. FHN has a Value Score of B and currently flaunts 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.