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4 Low Price-to-Sales Stocks to Win in the Current Market
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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.
JAKKS Pacific (JAKK - Free Report) , Black Hills (BKH - Free Report) , Barrett Business Services (BBSI - Free Report) and Centerspace (CSR - 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 four of the nine stocks that qualified the screening:
JAKKS Pacific is a multi-brand company designing and marketing a broad range of toys and consumer products. It has been benefiting from strategic acquisitions, a solid international footprint, its focus on innovation and collaborations with popular brands and movie franchisees. JAKKS Pacific has emerged as a diversified consumer products company, buoyed by a string of acquisitions over the past several years.
The company realized the importance of online retailing and shifted focus to aggressively boosting online sales. JAKKS Pacific has been committed to creating digital experiences for online shoppers, such as videos, 360-degree product images and enhanced web pages. It continues to modify its sales and logistics capabilities to capitalize on this continued shift to online. JAKK currently has a Zacks Rank #1 and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Black Hills operates as an electric and natural gas utility company in the United States. This Rapid City, SD-based company also constructs and maintains gas infrastructure facilities for gas transportation customers. It provides appliance repair services to residential utility customers, as well as electrical system construction services to large industrial customers.
The company is poised to benefit from its electric resource plans and initiatives to reliably serve growing customer demand for energy. It is also on track with actions to responsibly reduce emissions. BKH currently has a Value Score of B and a Zacks Rank #2.
Barrett provides business management solutions for small and mid-sized companies in the United States. The company develops a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry.
The company continues to gain from an expanding client base and the ongoing rollout of BBSI Benefits. Additionally, BBSI continues to witness positive results in its pricing and cost management strategies, resulting in strong, sustainable earnings growth. BBSI currently has a Value Score of A and carries a Zacks Rank #1.
Based in Minot, ND, Centerspace is a real estate development company. It is focused on the ownership, management, acquisitions, redevelopment and development of apartment communities. It is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others.
The company is poised to benefit from cost control measures implemented at the beginning of 2023, reflecting a significant reduction in repairs and maintenance costs. The company is focusing on the smart home and smart community category, which provides the highest capital return opportunities. It currently plans the implementation of smart home technology in about 50% of its total communities by the end of 2024. CSR currently has a Value Score of B 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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4 Low Price-to-Sales Stocks to Win in the Current Market
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.
JAKKS Pacific (JAKK - Free Report) , Black Hills (BKH - Free Report) , Barrett Business Services (BBSI - Free Report) and Centerspace (CSR - 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 four of the nine stocks that qualified the screening:
JAKKS Pacific is a multi-brand company designing and marketing a broad range of toys and consumer products. It has been benefiting from strategic acquisitions, a solid international footprint, its focus on innovation and collaborations with popular brands and movie franchisees. JAKKS Pacific has emerged as a diversified consumer products company, buoyed by a string of acquisitions over the past several years.
The company realized the importance of online retailing and shifted focus to aggressively boosting online sales. JAKKS Pacific has been committed to creating digital experiences for online shoppers, such as videos, 360-degree product images and enhanced web pages. It continues to modify its sales and logistics capabilities to capitalize on this continued shift to online. JAKK currently has a Zacks Rank #1 and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Black Hills operates as an electric and natural gas utility company in the United States. This Rapid City, SD-based company also constructs and maintains gas infrastructure facilities for gas transportation customers. It provides appliance repair services to residential utility customers, as well as electrical system construction services to large industrial customers.
The company is poised to benefit from its electric resource plans and initiatives to reliably serve growing customer demand for energy. It is also on track with actions to responsibly reduce emissions. BKH currently has a Value Score of B and a Zacks Rank #2.
Barrett provides business management solutions for small and mid-sized companies in the United States. The company develops a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry.
The company continues to gain from an expanding client base and the ongoing rollout of BBSI Benefits. Additionally, BBSI continues to witness positive results in its pricing and cost management strategies, resulting in strong, sustainable earnings growth. BBSI currently has a Value Score of A and carries a Zacks Rank #1.
Based in Minot, ND, Centerspace is a real estate development company. It is focused on the ownership, management, acquisitions, redevelopment and development of apartment communities. It is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others.
The company is poised to benefit from cost control measures implemented at the beginning of 2023, reflecting a significant reduction in repairs and maintenance costs. The company is focusing on the smart home and smart community category, which provides the highest capital return opportunities. It currently plans the implementation of smart home technology in about 50% of its total communities by the end of 2024. CSR currently has a Value Score of B 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.