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5 Low Price-to-Sales Stocks to Add Value to Your Portfolio
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Investing in stocks, after analyzing the valuation metrics, is considered one of the best practices. The price-to-earnings ratio has always been the obvious choice when considering valuation metrics. 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 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.
GIII Apparel Group, Ltd. (GIII - Free Report) , Caleres (CAL - Free Report) , KB Home (KBH - Free Report) , MRC Global Inc. (MRC - Free Report) and The Greenbrier Companies, Inc. (GBX - 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 17 stocks that qualified after the screening:
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed, owned and private-label brands. GIII has accelerated digital growth. It strives to become the best omnichannel organization, enhancing DKNY and Karl Lagerfeld Paris e-commerce platforms, and partnering with Amazon and Fanatics. Digital and omnichannel growth is a key priority.
GIII’s commitment to brand building, effective marketing, cost management and market expansion provides a solid foundation for continued growth and profitability in fiscal 2025 and beyond. The company's strategic initiatives leverage design and merchandising strengths to drive profitable sales growth through innovative products and collections. GIII has a Value Score of A and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caleres operates a market-leading portfolio of consumer-driven footwear brands that include Famous Footwear, Sam Edelman, Allen Edmonds, Naturalizer and Vionic. CAL has been benefiting from the momentum in its brand divisions. It continues to capture market share in the kids’ segment through its Famous Footwear brand. The company is well-positioned to execute its ongoing strategic plan, invest to fuel its growth initiatives and drive sustained value for its shareholders over the long term.
Caleres expects to continue focusing on reducing debt and maintaining its borrowings under its asset-based revolving credit facility at less than $100 million by 2026. CAL presently has a Value Score of A and a Zacks Rank #2.
Based in Los Angeles, CA, KB Home is a well-known homebuilder in the United States and one of the largest in the state. The company has been pursuing a return-focused growth plan that is designed to drive revenues and homebuilding operating income margin, return on invested capital, return on equity, and the leverage ratio. It is further benefiting from its intent of implementing the built-to-order model, reducing cycle times and offering various forms of mortgage concessions.
The company invests aggressively in land acquisition and development, mainly in high-end locations, which is critical for community count and top-line growth. This has eventually helped it reduce debt. KB Home remains optimistic that this blend of rising active inventory while reducing its annual interest incurred will boost gross margin and returns. KBH currently has a Value Score of A and a Zacks Rank #2.
MRC Global is one of the leading distributors of pipes, valves and fittings and related products and services. The company’s products are used across upstream, midstream and downstream sectors of the oil and gas industry. MRC Global’s diverse presence across several end markets, including upstream production, midstream pipelines and industrial and energy transition, enables it to tap opportunities and neutralize operating risks associated with a single market.
An increase in energy transition activities in the United States is aiding the company’s DIET sector. The increase in refining, chemical and mining customer projects also bode well. Handsome rewards to its shareholders raise the stock's attractiveness. MRC currently has a Zacks Rank #2 and a Value Score of A.
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.
The company is progressing well on its strategic goals. Management expects sustained financial performance amid healthy market demand. GBX 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.
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5 Low Price-to-Sales Stocks to Add Value to Your Portfolio
Investing in stocks, after analyzing the valuation metrics, is considered one of the best practices. The price-to-earnings ratio has always been the obvious choice when considering valuation metrics. 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 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.
GIII Apparel Group, Ltd. (GIII - Free Report) , Caleres (CAL - Free Report) , KB Home (KBH - Free Report) , MRC Global Inc. (MRC - Free Report) and The Greenbrier Companies, Inc. (GBX - 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 17 stocks that qualified after the screening:
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed, owned and private-label brands. GIII has accelerated digital growth. It strives to become the best omnichannel organization, enhancing DKNY and Karl Lagerfeld Paris e-commerce platforms, and partnering with Amazon and Fanatics. Digital and omnichannel growth is a key priority.
GIII’s commitment to brand building, effective marketing, cost management and market expansion provides a solid foundation for continued growth and profitability in fiscal 2025 and beyond. The company's strategic initiatives leverage design and merchandising strengths to drive profitable sales growth through innovative products and collections. GIII has a Value Score of A and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caleres operates a market-leading portfolio of consumer-driven footwear brands that include Famous Footwear, Sam Edelman, Allen Edmonds, Naturalizer and Vionic. CAL has been benefiting from the momentum in its brand divisions. It continues to capture market share in the kids’ segment through its Famous Footwear brand. The company is well-positioned to execute its ongoing strategic plan, invest to fuel its growth initiatives and drive sustained value for its shareholders over the long term.
Caleres expects to continue focusing on reducing debt and maintaining its borrowings under its asset-based revolving credit facility at less than $100 million by 2026. CAL presently has a Value Score of A and a Zacks Rank #2.
Based in Los Angeles, CA, KB Home is a well-known homebuilder in the United States and one of the largest in the state. The company has been pursuing a return-focused growth plan that is designed to drive revenues and homebuilding operating income margin, return on invested capital, return on equity, and the leverage ratio. It is further benefiting from its intent of implementing the built-to-order model, reducing cycle times and offering various forms of mortgage concessions.
The company invests aggressively in land acquisition and development, mainly in high-end locations, which is critical for community count and top-line growth. This has eventually helped it reduce debt. KB Home remains optimistic that this blend of rising active inventory while reducing its annual interest incurred will boost gross margin and returns. KBH currently has a Value Score of A and a Zacks Rank #2.
MRC Global is one of the leading distributors of pipes, valves and fittings and related products and services. The company’s products are used across upstream, midstream and downstream sectors of the oil and gas industry. MRC Global’s diverse presence across several end markets, including upstream production, midstream pipelines and industrial and energy transition, enables it to tap opportunities and neutralize operating risks associated with a single market.
An increase in energy transition activities in the United States is aiding the company’s DIET sector. The increase in refining, chemical and mining customer projects also bode well. Handsome rewards to its shareholders raise the stock's attractiveness. MRC currently has a Zacks Rank #2 and a Value Score of A.
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.
The company is progressing well on its strategic goals. Management expects sustained financial performance amid healthy market demand. GBX 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.