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5 Lucrative Price-to-Sales Stocks to Refine Your 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.
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 16 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 sports a Zacks Rank #1 and has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Green Dot, a pro-consumer bank holding company and personal banking provider, offers products and services directly to customers through a large-scale omni-channel national distribution platform. It continues to focus on the acquisition of long-term users of its products, improving brands and image, building market adoption and awareness of products, increasing card use, and customer retention. Its sales and marketing efforts are focused on a broad group, ranging from never-banked to fully-banked consumers.
Green Dot is expanding its addressable market with the help of its banking-as-a-service (BaaS) account programs. These solutions are then made available by the partners to their consumers and partners again through integration with the BaaS program, eventually expanding Green Dot’s spectrum of consumers. GDOT currently flaunts 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. The company'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.
Avista operates as an electric and natural gas utility company. This energy company is involved in the production, transmission and distribution of energy and other energy-related businesses. Avista Utilities is its operating division that service electric service customers and natural gas customers.
AVA is on track with the execution of its strategy, including constructive regulatory outcomes and ongoing diligence in managing costs. These position it to deliver robust performances in the near and long term. AVA 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 its principal subsidiary, First Horizon Bank. 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 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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5 Lucrative Price-to-Sales Stocks to Refine Your 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.
JAKKS Pacific (JAKK - Free Report) , Green Dot (GDOT - Free Report) , Lakeland Industries (LAKE - Free Report) , Avista (AVA - 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 16 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 sports a Zacks Rank #1 and has a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Green Dot, a pro-consumer bank holding company and personal banking provider, offers products and services directly to customers through a large-scale omni-channel national distribution platform. It continues to focus on the acquisition of long-term users of its products, improving brands and image, building market adoption and awareness of products, increasing card use, and customer retention. Its sales and marketing efforts are focused on a broad group, ranging from never-banked to fully-banked consumers.
Green Dot is expanding its addressable market with the help of its banking-as-a-service (BaaS) account programs. These solutions are then made available by the partners to their consumers and partners again through integration with the BaaS program, eventually expanding Green Dot’s spectrum of consumers. GDOT currently flaunts 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. The company'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.
Avista operates as an electric and natural gas utility company. This energy company is involved in the production, transmission and distribution of energy and other energy-related businesses. Avista Utilities is its operating division that service electric service customers and natural gas customers.
AVA is on track with the execution of its strategy, including constructive regulatory outcomes and ongoing diligence in managing costs. These position it to deliver robust performances in the near and long term. AVA 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 its principal subsidiary, First Horizon Bank. 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 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.