雅虎香港財經 5 Low Price-to-Sales Stocks Positioned to Reap Higher Returns
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.
Lakeland Industries LAKE, Caleres CAL, Ingredion INGR, ProPetro Holding Corp. PUMP and Barrett Business Services BBSI 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 18 stocks that qualified the screening:
Lakeland Industries operates as a leading global manufacturer of protective clothing for industry, healthcare and first responders on the federal, state and local levels. LAKE's focus on high-value products and market diversification, particularly in the fire service and industrial product lines, has been aiding its performance.
The company has been committed to its acquisition pipeline and is focused on organic growth for the remainder of fiscal 2024. LAKE 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 includes 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.
In the near term, Caleres expects to continue to focus on reducing debt and maintain 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.
Ingredion is a leading global ingredient solutions provider serving customers in more than 120 countries. The company turns grains, fruits, vegetables and other plant-based materials into value-added ingredient solutions for the food, beverage, animal nutrition, brewing and industrial markets. The company is on track with its multi-year cost-saving program named cost to compete. Some of the notable cost to compete initiatives include a project undertaken to unlock capacity across its manufacturing footprint by applying machine learning and AI.
Ingredion’s initiatives to optimize its supply chain, distribution and warehouse network in pursuit of service excellence, efficiencies and savings bode well. Additionally, the company has a legacy of transforming and evolving its business in response to changing market dynamics. INGR currently has a Value Score of A and a Zacks Rank #2.
Midland, TX-based ProPetro is an oilfield service provider operating primarily in the Permian Basin spread over west Texas and New Mexico. The company focuses on growth through a combination of acquisitions and pressure pumping services in the lucrative Permian Basin. Its purchase of Pioneer Natural Resources assets has significantly boosted its fleet size. The deal's 10-year dedicated service agreement should ensure a stable revenue base in the medium to long term.
ProPetro, through its leverage to the Permian Basin, is likely to benefit from this multi-year upcycle by providing hydraulic fracturing and other well-completion services to the E&P firms. The company’s strong relationships with high-quality customers provide revenue visibility and business certainty. It is also set to benefit from a debt-light balance sheet, which provides a potential lifeline amid a challenging operating environment. PUMP currently has a Zacks Rank #2 and a Value Score of A.
Barrett provides business management solutions for small and mid-sized companies in the United States. The company has developed a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry.
BBSI has been gaining from an expanding client base and the ongoing rollout of BBSI Benefits. Additionally, Barrett has been witnessing positive results in its pricing and cost-management strategies, leading to strong, sustainable earnings growth. BBSI currently has a Value Score of A and a Zacks Rank #2.
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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.
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Ingredion Incorporated (INGR) : Free Stock Analysis Report
Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
Lakeland Industries, Inc. (LAKE) : Free Stock Analysis Report
Caleres, Inc. (CAL) : Free Stock Analysis Report
ProPetro Holding Corp. (PUMP) : Free Stock Analysis Report
