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7 Low Price-to-Sales Stocks to Garner Solid Profits
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A stock’s Price-to-Sales ratio reflects how much investors are paying for each dollar of revenues generated by the company.
If the Price-to-Sales ratio is 1, it means that investors are paying $1 for every $1 of revenues generated by the company. So it goes without saying that a stock with 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 more suitable for investment versus a stock with a high Price-to-Sales ratio.
While Price-to-Earnings is the first thing to cross one’s mind while using valuation metrics, Price-to-Sales has emerged as a convenient tool to determine the value of stocks that are incurring losses or are in an early cycle of development, generating meager or no profits.
Though a loss-making company with a negative Price-to-Earnings ratio falls out of investors’ favor, its Price-to-Sales could indicate the hidden strength of its business. This underrated ratio is also used to identify recovery situation or ensure that a company's growth is not overvalued.
Price-to-Sales 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 low Price-to-Sales is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance and a rise in market cap and ultimately a higher Price-to-Sales ratio.
In any case, the Price-to-Sales ratio used in isolation can’t do the trick. One should also analyze other ratios like Price/Earnings, Price/Book, 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: They must all 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 Style Score less than or equal to B: Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined a Zacks Rank #1 or #2 offer the best opportunities in the value investing space.
Here are seven of the 22 stocks that qualified the screening:
Universal Forest Products Inc. (UFPI - Free Report) engineers, manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products. The stock currently has a Zacks Rank #2 and a Value score of ‘B’. Also, the 3–5 year EPS growth rate for the stock is estimated at 10%.
Luxembourg-based ArcelorMittal (MT - Free Report) is the world’s leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost competitive steel plants across both the developed and developing world. This Zacks Rank #1 company has a 3–5 years EPS growth rate of 11.5% and a Value score of ‘A’.
KT Corporation (KT - Free Report) is a telecommunications service provider in Korea. It offers mobile voice and data telecommunication services, fixed-line telephone services, and Internet phone services. It also provides broadband Internet access services and other Internet-related services. This Zacks Rank #2 company has a Value score of ‘A’.
POSCO (PKX - Free Report) is a producer and seller of steel rolled products and plates in South Korea and internationally. It has a 3–5 year EPS growth rate of 5%. The stock currently has a Value score of ‘A’ and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
SK Telecom Co., Ltd. (SKM - Free Report) is a provider of wireless telecommunications services in South Korea. The company offers wireless voice transmission services, cellular global roaming services, and interconnection services to connect its networks to fixed-line and other wireless networks. This Zacks Rank #1 company’s 3–5 year EPS growth rate is pegged at 0.05%. The stock has a Value score of ‘A’.
Korea Electric Power Corporation (KEP - Free Report) , also known as KEPCO, is an integrated electric utility engaged in the generation, transmission, distribution of electricity and development of electric power resources in South Korea. This Zacks Rank #2 company’s 3–5 year EPS growth rate is pegged at 5%. The stock has a Value score of ‘A’.
Herndon, VA-based ePlus Inc. (PLUS - Free Report) was founded in 1990 and is a provider of information technology (IT) products and services, flexible leasing and financing solutions, and enterprise supply management in the U.S. It currently has a Zacks Rank #2 and a Value score of ‘B’. The stock has a 3–5 year EPS growth rate of 5%.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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7 Low Price-to-Sales Stocks to Garner Solid Profits
A stock’s Price-to-Sales ratio reflects how much investors are paying for each dollar of revenues generated by the company.
If the Price-to-Sales ratio is 1, it means that investors are paying $1 for every $1 of revenues generated by the company. So it goes without saying that a stock with 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 more suitable for investment versus a stock with a high Price-to-Sales ratio.
While Price-to-Earnings is the first thing to cross one’s mind while using valuation metrics, Price-to-Sales has emerged as a convenient tool to determine the value of stocks that are incurring losses or are in an early cycle of development, generating meager or no profits.
Though a loss-making company with a negative Price-to-Earnings ratio falls out of investors’ favor, its Price-to-Sales could indicate the hidden strength of its business. This underrated ratio is also used to identify recovery situation or ensure that a company's growth is not overvalued.
Price-to-Sales 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 low Price-to-Sales is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance and a rise in market cap and ultimately a higher Price-to-Sales ratio.
In any case, the Price-to-Sales ratio used in isolation can’t do the trick. One should also analyze other ratios like Price/Earnings, Price/Book, 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: They must all 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 Style Score less than or equal to B: Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined a Zacks Rank #1 or #2 offer the best opportunities in the value investing space.
Here are seven of the 22 stocks that qualified the screening:
Universal Forest Products Inc. (UFPI - Free Report) engineers, manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products. The stock currently has a Zacks Rank #2 and a Value score of ‘B’. Also, the 3–5 year EPS growth rate for the stock is estimated at 10%.
Luxembourg-based ArcelorMittal (MT - Free Report) is the world’s leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost competitive steel plants across both the developed and developing world. This Zacks Rank #1 company has a 3–5 years EPS growth rate of 11.5% and a Value score of ‘A’.
KT Corporation (KT - Free Report) is a telecommunications service provider in Korea. It offers mobile voice and data telecommunication services, fixed-line telephone services, and Internet phone services. It also provides broadband Internet access services and other Internet-related services. This Zacks Rank #2 company has a Value score of ‘A’.
POSCO (PKX - Free Report) is a producer and seller of steel rolled products and plates in South Korea and internationally. It has a 3–5 year EPS growth rate of 5%. The stock currently has a Value score of ‘A’ and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
SK Telecom Co., Ltd. (SKM - Free Report) is a provider of wireless telecommunications services in South Korea. The company offers wireless voice transmission services, cellular global roaming services, and interconnection services to connect its networks to fixed-line and other wireless networks. This Zacks Rank #1 company’s 3–5 year EPS growth rate is pegged at 0.05%. The stock has a Value score of ‘A’.
Korea Electric Power Corporation (KEP - Free Report) , also known as KEPCO, is an integrated electric utility engaged in the generation, transmission, distribution of electricity and development of electric power resources in South Korea. This Zacks Rank #2 company’s 3–5 year EPS growth rate is pegged at 5%. The stock has a Value score of ‘A’.
Herndon, VA-based ePlus Inc. (PLUS - Free Report) was founded in 1990 and is a provider of information technology (IT) products and services, flexible leasing and financing solutions, and enterprise supply management in the U.S. It currently has a Zacks Rank #2 and a Value score of ‘B’. The stock has a 3–5 year EPS growth rate of 5%.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »