雅虎香港財經 5 Valuable Low Price-to-Sales Stocks to Refresh 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.
Molson Coors TAP, PagSeguro Digital PAGS, Cigna Group CI, State Street STT and First Horizon FHN 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:
Molson Coors is one of the largest brewers in the world and boasts a strong portfolio of well-established brands. The company crafts high-quality, innovative products, thus targeting to become the first choice for its consumers. The company remains well-placed on the back of its revitalization plan and the premiumization of the global portfolio.
Molson Coors is on track with its revitalization plan focused on achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities. With a view to accelerating portfolio premiumization, the company has been aggressively growing its above-premium portfolio in the past few years. TAP currently sports a Zacks Rank #1 and has a Value Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
São Paulo, Brazil-based PagSeguro Digital provides financial technology solutions and services for micro-merchants, and small and medium-sized businesses in Brazil and internationally. The company offers multiple digital payment solutions, in-person payments via point-of-sales devices and prepaid card services. PagSeguro Digital has been diversifying its payment business and 2022 marked the consolidation of its HUBs initiative to extend its best-in-class services to small and mid-sized clients.
The company’s disciplined capital allocation has significantly aided operating and investing cash flow generation, positioning it to explore opportunities in payments and financial services in Brazil in the coming years. PAGS stock has a Value Score of A and currently flaunts a Zacks Rank #1.
Cigna Group is a global health company. It has been growing its membership for many quarters now, and we expect it to keep growing. Its diversified product portfolio, wide agent network and superior service are major positives. In its government business, including Medicare Advantage, the company continues to drive strong market and product expansion, as well as in-market growth.
The company has been focused on strategic bolt-on buyouts and tie-ups to boost inorganic growth. The company’s revenues have been increasing consistently since 2010, driven by several acquisitions, its superior operating performance and the provision of quality products and services. The company’s consistent focus on providing affordable, predictable and simple solutions to its clients positions it well for the long haul. CI currently has a Value Score of A and carries a Zacks Rank #2.
State Street is a financial holding company. It provides a range of products and services for institutional investors worldwide through its subsidiaries. State Street is poised for growth on the back of business servicing wins, synergies from strategic buyouts, global footprint, higher interest rates and strong balance sheet and liquidity positions.
State Street remains well-positioned with respect to fundamental business activities, given its global exposure and a broad array of innovative products and services (including the launch of State Street Digital and State Street Alpha). These efforts, along with business servicing wins and inorganic growth strategy, are expected to keep supporting fee revenues. STT 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 First Horizon Bank, which is its principal subsidiary. 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 has a Value Score of B and currently carries 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
State Street Corporation (STT) : Free Stock Analysis Report
Cigna Group (CI) : Free Stock Analysis Report
Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
First Horizon Corporation (FHN) : Free Stock Analysis Report
PagSeguro Digital Ltd. (PAGS) : Free Stock Analysis Report
