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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., Caleres, KB Home, MRC Global Inc. and The Greenbrier Companies, Inc. are some companies with a low price-to-sales ratio and the potential to offer higher returns.
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 fleets 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.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights GIII Apparel Group, Caleres, KB Home, MRC Global and Greenbrier
For Immediate Release
Chicago, IL – July 11, 2024 – Stocks in this week’s article are 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) .
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., Caleres, KB Home, MRC Global Inc. and The Greenbrier Companies, Inc. are some companies with a low price-to-sales ratio and the potential to offer higher returns.
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 fleets 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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2299128/5-low-price-to-sales-stocks-to-add-value-to-your-portfolio
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.