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Invest in These 5 Low Price-to-Sales Stocks Before They Take Off
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Key Takeaways
HG, GBX, SIG, CTSH and PAGS screen well for value with low P/S ratios and strong business fundamentals.
A P/S ratio under 1 signals investors pay less than $1 for each $1 of revenues, marking a potential bargain.
P/S works well for spotting growth plays wherein earnings may be negative, but revenue trends remain strong.
Investing in stocks based on valuation metrics is a proven strategy for identifying opportunities with strong upside potential. While the price-to-earnings (P/E) ratio is a popular tool for gauging value, it has its limitations, especially when evaluating companies that are unprofitable or still in their early growth phases.
In such cases, the price-to-sales (P/S) ratio becomes particularly valuable. By comparing a company’s market capitalization to its revenues, the P/S ratio offers a clearer picture of value when earnings are minimal or volatile.
If you are looking for growth at a discount, low P/S stocks can offer compelling opportunities. These stocks often trade below their intrinsic value, making them attractive to investors seeking upside potential without paying a premium. While the P/S ratio alone does not guarantee success, when combined with strong fundamentals and positive business momentum, it can signal a stock poised for a breakout.
Hamilton Insurance Group, Ltd. (HG - Free Report) , The Greenbrier Companies, Inc. (GBX - Free Report) , Signet Jewelers (SIG - Free Report) , Cognizant Technology Solutions (CTSH - Free Report) and PagSeguro Digital (PAGS - Free Report) are some companies with low price-to-sales ratios and the potential to offer higher returns.
What is 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 ratio 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 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.
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 17 stocks that qualified the screening:
Hamilton Insurance operates as a specialty insurance and reinsurance company in Bermuda and internationally. The company operates Hamilton Global Specialty, Hamilton Select and Hamilton Re underwriting platforms. HG is benefiting from strong execution, a clear growth roadmap and disciplined capital management. The company is capitalizing on profitable market opportunities, with gross premiums written rising meaningfully, reflecting momentum in property, casualty and specialty lines.
Hamilton’s underwriting strategy is increasingly diversified and supported by a stable attritional loss ratio. Its focus on long-term portfolio resilience is evident in efforts to refine its risk mix and manage volatility. With a well-capitalized balance sheet, prudent reserve development and a scalable underwriting platform, Hamilton is well-positioned to navigate industry headwinds while capturing sustained, profitable growth in the global specialty insurance and reinsurance markets. HG currently has a Zacks Rank #2 and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Greenbrier is a leading international supplier of equipment and services to global freight transportation markets. The company’s broad product lineup, extensive market relationships, supportive customer experience and deep commercial origination capabilities create a unique leadership position and enable ongoing success. These factors provide revenue visibility while supporting its profitable leasing business, which is growing through disciplined investments in leased railcar fleet and robust lease renewals.
Greenbrier is progressing well on its long-term goals. Management expects a sustained financial performance amid healthy market demand. GBX has a Value Score of A and currently flaunts a Zacks Rank #1.
Hamilton, Bermuda-based Signet is a retailer of diamond jewelry, watches and other products. The company operates in the United States, Canada, the U.K., the Republic of Ireland and the Channel Islands. It is often considered to be the leading retailer of diamond jewelry. Signet continues to demonstrate strength in key jewelry segments, with bridal and fashion jewelry driving growth.
Inventory management remains a significant strength for Signet. Agile inventory management has been boosting SIG’s sales, while strategic restructuring and real estate optimization are enhancing its operational efficiency. Signet has implemented significant cost-saving initiatives, leading to a notable improvement in its financial performance. By optimizing its real estate portfolio, SIG aims to improve sales transference across the remaining stores and enhance overall profitability. The strategic moves in real estate not only support current operational performance but also pave the way for growth as the retail landscape evolves. SIG has a Value Score of A and a Zacks Rank #2 at present.
Cognizant is a leading professional services company. The company’s services include digital services and solutions, consulting, application development, systems integration, application testing, application maintenance, infrastructure services and business process services. Cognizant is benefiting from a strong product pipeline, including a favorable mix of new opportunities. Robust organic growth, particularly in Health Sciences and Financial Services, has been a significant growth driver.
The acquisition of Belcan is bolstering CTSH’s portfolio, adding 450 basis points An expanding clientele, driven by partnerships with companies like Docusign, OMRON and ServiceNow, is also contributing to growth. AI initiatives, including Flowsource and Neuro Edge, are enhancing productivity in software development and IT operations. CTSH currently has a Value Score of B and a Zacks Rank #2.
São Paulo, Brazil-based PagSeguro Digital offers a broad suite of financial and payment solutions tailored for consumers, individual entrepreneurs, micro-merchants, and small to mid-sized businesses across Brazil and select international markets. Its offerings include digital banking, wire transfers, tax payments, ATM access, and POS and online payment tools. With a tech-driven, integrated ecosystem, PagSeguro delivers accessible services that support daily operations and drive business growth.
PAGS is strengthening its digital banking platform, expanding services for consumers and merchants, while adjusting credit offerings to manage funding cost pressures. Its shift toward secured lending reflects a disciplined, risk-aware strategy. With a focus on innovation, sustainable growth and prudent financial management, PagSeguro is well-positioned to seize long-term opportunities in Brazil’s dynamic digital finance space. PAGS 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.
Image: Bigstock
Invest in These 5 Low Price-to-Sales Stocks Before They Take Off
Key Takeaways
Investing in stocks based on valuation metrics is a proven strategy for identifying opportunities with strong upside potential. While the price-to-earnings (P/E) ratio is a popular tool for gauging value, it has its limitations, especially when evaluating companies that are unprofitable or still in their early growth phases.
In such cases, the price-to-sales (P/S) ratio becomes particularly valuable. By comparing a company’s market capitalization to its revenues, the P/S ratio offers a clearer picture of value when earnings are minimal or volatile.
If you are looking for growth at a discount, low P/S stocks can offer compelling opportunities. These stocks often trade below their intrinsic value, making them attractive to investors seeking upside potential without paying a premium. While the P/S ratio alone does not guarantee success, when combined with strong fundamentals and positive business momentum, it can signal a stock poised for a breakout.
Hamilton Insurance Group, Ltd. (HG - Free Report) , The Greenbrier Companies, Inc. (GBX - Free Report) , Signet Jewelers (SIG - Free Report) , Cognizant Technology Solutions (CTSH - Free Report) and PagSeguro Digital (PAGS - Free Report) are some companies with low price-to-sales ratios and the potential to offer higher returns.
What is 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 ratio 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 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.
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 17 stocks that qualified the screening:
Hamilton Insurance operates as a specialty insurance and reinsurance company in Bermuda and internationally. The company operates Hamilton Global Specialty, Hamilton Select and Hamilton Re underwriting platforms. HG is benefiting from strong execution, a clear growth roadmap and disciplined capital management. The company is capitalizing on profitable market opportunities, with gross premiums written rising meaningfully, reflecting momentum in property, casualty and specialty lines.
Hamilton’s underwriting strategy is increasingly diversified and supported by a stable attritional loss ratio. Its focus on long-term portfolio resilience is evident in efforts to refine its risk mix and manage volatility. With a well-capitalized balance sheet, prudent reserve development and a scalable underwriting platform, Hamilton is well-positioned to navigate industry headwinds while capturing sustained, profitable growth in the global specialty insurance and reinsurance markets. HG currently has a Zacks Rank #2 and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Greenbrier is a leading international supplier of equipment and services to global freight transportation markets. The company’s broad product lineup, extensive market relationships, supportive customer experience and deep commercial origination capabilities create a unique leadership position and enable ongoing success. These factors provide revenue visibility while supporting its profitable leasing business, which is growing through disciplined investments in leased railcar fleet and robust lease renewals.
Greenbrier is progressing well on its long-term goals. Management expects a sustained financial performance amid healthy market demand. GBX has a Value Score of A and currently flaunts a Zacks Rank #1.
Hamilton, Bermuda-based Signet is a retailer of diamond jewelry, watches and other products. The company operates in the United States, Canada, the U.K., the Republic of Ireland and the Channel Islands. It is often considered to be the leading retailer of diamond jewelry. Signet continues to demonstrate strength in key jewelry segments, with bridal and fashion jewelry driving growth.
Inventory management remains a significant strength for Signet. Agile inventory management has been boosting SIG’s sales, while strategic restructuring and real estate optimization are enhancing its operational efficiency. Signet has implemented significant cost-saving initiatives, leading to a notable improvement in its financial performance. By optimizing its real estate portfolio, SIG aims to improve sales transference across the remaining stores and enhance overall profitability. The strategic moves in real estate not only support current operational performance but also pave the way for growth as the retail landscape evolves. SIG has a Value Score of A and a Zacks Rank #2 at present.
Cognizant is a leading professional services company. The company’s services include digital services and solutions, consulting, application development, systems integration, application testing, application maintenance, infrastructure services and business process services. Cognizant is benefiting from a strong product pipeline, including a favorable mix of new opportunities. Robust organic growth, particularly in Health Sciences and Financial Services, has been a significant growth driver.
The acquisition of Belcan is bolstering CTSH’s portfolio, adding 450 basis points An expanding clientele, driven by partnerships with companies like Docusign, OMRON and ServiceNow, is also contributing to growth. AI initiatives, including Flowsource and Neuro Edge, are enhancing productivity in software development and IT operations. CTSH currently has a Value Score of B and a Zacks Rank #2.
São Paulo, Brazil-based PagSeguro Digital offers a broad suite of financial and payment solutions tailored for consumers, individual entrepreneurs, micro-merchants, and small to mid-sized businesses across Brazil and select international markets. Its offerings include digital banking, wire transfers, tax payments, ATM access, and POS and online payment tools. With a tech-driven, integrated ecosystem, PagSeguro delivers accessible services that support daily operations and drive business growth.
PAGS is strengthening its digital banking platform, expanding services for consumers and merchants, while adjusting credit offerings to manage funding cost pressures. Its shift toward secured lending reflects a disciplined, risk-aware strategy. With a focus on innovation, sustainable growth and prudent financial management, PagSeguro is well-positioned to seize long-term opportunities in Brazil’s dynamic digital finance space. PAGS 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