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Tap These 5 Low Price-to-Sales Stocks to Get Standout Returns
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Investment in stocks made after an analysis of valuation metrics is usually 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, price-to-sales has emerged as a convenient tool to determine the value of stocks incurring losses or are in an early cycle of development, generating meager or no profits.
While a loss-making company with a negative price-to-earnings ratio falls out of investor 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.
Nu Skin Enterprises (NUS - Free Report) , Caleres Inc. (CAL - Free Report) , Preferred Apartment Communities, Inc. , Schneider National (SNDR - Free Report) and MDU Resources Group (MDU - Free Report) are some stocks with a low price-to-sales ratio and the potential to offer higher returns.
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 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.
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 the five stocks of the 35 that qualified the screening:
Nu Skin develops and distributes a wide range of premium cosmetics, beauty, personal care and wellness products. While the company specializes in beauty and personal care, it also provides a wide range of nutritional products. Nu Skin’s products are available in more than 50 markets worldwide.
Nu Skin offers premium quality personal care products under the Nu Skin brand banner, while nutritional supplements are marketed under Pharmanex. Both these brand categories have been yielding well. The stock currently has a Value Score of A and a Zacks Rank #2.
Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China, and Guam. It operates through Famous Footwear and Brand Portfolio segments.
Caleres offers licensed, branded, and private-label athletic, casual, and dress footwear products to women, men, and children. CAL currently has a Zacks Rank #1 and a Value Score of B.
Preferred Apartment is a Maryland corporation formed primarily to own and operate multifamily properties. It also, to a lesser extent, owns and operates student housing properties, grocery-anchored shopping centers and strategically located, well-leased class A office buildings, all in select targeted markets throughout the United States.
Preferred Apartment currently has a Zacks Rank #2 and a Value Score of A. APTS has a 3–5 year EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Schneider National is a leading transportation and logistics services company. It offers a portfolio of premier truckload, intermodal and logistics solutions. Schneider operates one of the largest for-hire trucking fleets in North America.
Schneider’s offerings include dry van, bulk transport, intermodal and supply chain management. The stock currently has a Value Score of A and a Zacks Rank #2. It has a 3–5 year EPS growth rate of 20.7%.
Bismarck, North Dakota-based MDU Resources is a utility natural gas distribution company. MDU provides value-added natural resource products and related services essential for energy transportation, regulated energy delivery and construction materials and services business. It operates through regulated energy delivery platform and construction materials and services platform. The two-platform strategy helps to balance out seasonality-related risks.
MDU Resources has five reportable business segments — Electric, Natural gas distribution, Pipeline, Construction materials and contracting, and Construction services. MDU currently has a Value Score of A and a Zacks Rank #2. It has a long-term earnings growth rate of 6.8%
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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Tap These 5 Low Price-to-Sales Stocks to Get Standout Returns
Investment in stocks made after an analysis of valuation metrics is usually 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, price-to-sales has emerged as a convenient tool to determine the value of stocks incurring losses or are in an early cycle of development, generating meager or no profits.
While a loss-making company with a negative price-to-earnings ratio falls out of investor 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.
Nu Skin Enterprises (NUS - Free Report) , Caleres Inc. (CAL - Free Report) , Preferred Apartment Communities, Inc. , Schneider National (SNDR - Free Report) and MDU Resources Group (MDU - Free Report) are some stocks with a low price-to-sales ratio and the potential to offer higher returns.
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 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.
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 the five stocks of the 35 that qualified the screening:
Nu Skin develops and distributes a wide range of premium cosmetics, beauty, personal care and wellness products. While the company specializes in beauty and personal care, it also provides a wide range of nutritional products. Nu Skin’s products are available in more than 50 markets worldwide.
Nu Skin offers premium quality personal care products under the Nu Skin brand banner, while nutritional supplements are marketed under Pharmanex. Both these brand categories have been yielding well. The stock currently has a Value Score of A and a Zacks Rank #2.
Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China, and Guam. It operates through Famous Footwear and Brand Portfolio segments.
Caleres offers licensed, branded, and private-label athletic, casual, and dress footwear products to women, men, and children. CAL currently has a Zacks Rank #1 and a Value Score of B.
Preferred Apartment is a Maryland corporation formed primarily to own and operate multifamily properties. It also, to a lesser extent, owns and operates student housing properties, grocery-anchored shopping centers and strategically located, well-leased class A office buildings, all in select targeted markets throughout the United States.
Preferred Apartment currently has a Zacks Rank #2 and a Value Score of A. APTS has a 3–5 year EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Schneider National is a leading transportation and logistics services company. It offers a portfolio of premier truckload, intermodal and logistics solutions. Schneider operates one of the largest for-hire trucking fleets in North America.
Schneider’s offerings include dry van, bulk transport, intermodal and supply chain management. The stock currently has a Value Score of A and a Zacks Rank #2. It has a 3–5 year EPS growth rate of 20.7%.
Bismarck, North Dakota-based MDU Resources is a utility natural gas distribution company. MDU provides value-added natural resource products and related services essential for energy transportation, regulated energy delivery and construction materials and services business. It operates through regulated energy delivery platform and construction materials and services platform. The two-platform strategy helps to balance out seasonality-related risks.
MDU Resources has five reportable business segments — Electric, Natural gas distribution, Pipeline, Construction materials and contracting, and Construction services. MDU currently has a Value Score of A and a Zacks Rank #2. It has a long-term earnings growth rate of 6.8%
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.