For Immediate Release
Chicago, IL –July 26, 2017 - Stocks in this week’s article include Hibbett Sports Inc. (NASDAQ: HIBB – Free Report), DiamondRock Hospitality Company (NYSE: DRH – Free Report), Citizens Financial Group Inc. (NYSE: CFG – Free Report), The Greenbrier Companies, Inc. (NYSE: GBX – Free Report) and AllianceBernstein Holding L.P. (NYSE: AB – Free Report).
Stocks with Impressive Price-to-Sales Ratios Worth a Look
A stock’s Price-to-Sales ratio reflects how much investors are paying for each dollar of revenues generated by the company.
If the Price-to-Sales ratio is 1, it means that investors are paying $1 for every $1 of revenues generated by the company. So it goes without saying that a stock with 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 more suitable for investment compared to a stock with a high Price-to-Sales ratio.
While Price-to-Earnings is the first thing to cross one’s mind while using valuation metrics, Price-to-Sales has emerged as a convenient tool to determine the value of stocks that are incurring losses or are in an early cycle of development, generating meager or no profits.
Though 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 its business. This underrated ratio is also used to identify recovery situation or ensure that a company's growth is not overvalued.
Price-to-Sales 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.
Nonetheless, one should keep in mind that a company with high debt and low Price-to-Sales is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance and a rise in market cap and ultimately a higher Price-to-Sales ratio.
In any case, the Price-to-Sales ratio used in isolation can’t do the trick. One should also analyze other ratios like Price/Earnings, Price/Book, Debt/Equity before arriving at any investment decision.
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: They must all 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 Style Score less than or equal to B: Our research shows that stocks with a Value Style 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 21 stocks that qualified the screening:
Hibbett Sports Inc. (NASDAQ: HIBB – Free Report) is a sporting goods retailer operating in small to mid-sized markets in the South, Southwest, Mid-Atlantic and lower Midwest regions of the U.S. This Zacks Rank #2 company has a 3–5 year EPS growth rate of 8.1%. The stock has a Value Score of ‘A.’
DiamondRock Hospitality Company (NYSE: DRH – Free Report ) is a lodging focused real estate company, which owns premium hotels and resorts in North America. It operates hotels under the Hilton, Marriott, and Westin brand names in New York, Los Angeles, Chicago, Boston, and Atlanta; and in destination resort locations, such as the United States Virgin Islands and Colorado. It has a 3–5 year EPS growth rate of 5%. The stock currently has a Value Score of ‘B’ and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here .
Citizens Financial Group Inc. (NYSE: CFG – Free Report) is a bank holding company for Citizens Bank, N.A. and Citizens Bank of Pennsylvania that provides retail and commercial banking products and services in the U.S. This Zacks Rank #2 company’s 3–5 year EPS growth rate is 18.2%. The stock has a Value Score of ‘A.’
The Greenbrier Companies, Inc . (NYSE: GBX – Free Report) is a manufacturer and seller of railroad freight car equipment in North America and Europe. This Zacks Rank #2 company’s 3–5 year EPS growth rate is pegged at 9.5%. The stock has a Value Score of ‘A.’
New York-based AllianceBernstein Holding L.P. (NYSE: AB – Free Report) was founded in 1987 and is a publicly owned investment manager that also provides research services to its clients. It currently has a Zacks Rank #2 and a Value Score of ‘A.’ The stock has a 3–5 year EPS growth rate of 7.4%.
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