The price-to-sales ratio of a stock reflects how much investors pay for every dollar in revenue a business generates.
If the price / sell ratio is 1, that means investors pay $ 1 for every $ 1 in revenue generated by the business. So, it goes without saying that a stock with a price-to-sell ratio of less than 1 is a good deal, as investors have to pay less than a dollar for the dollar.
Thus, a stock with a lower price / sell ratio is a more appropriate investment than a stock with a high price / sell ratio.
Investing in stocks after a valuation metrics analysis is generally considered to be best practice. When considering valuation metrics, the price / earnings ratio has always been the obvious choice. Indeed, income-based calculations are easy and useful. However, the sell price has become a practical tool for determining the value of stocks that are losing money or are in an early development cycle, generating little or no profit.
As a loss-making company with a negative price-to-earnings ratio falls out of favor with investors, its price-to-sales ratio could indicate the company’s hidden strength. This underestimated ratio also makes it possible to identify a recovery situation or to ensure that the growth of a company is not overestimated.
Price / sales ratio is often preferred over price / profit because companies can manipulate their profits using various accounting measures. However, sales are more difficult to handle and are relatively reliable.
However, it should be borne in mind that a business with high debt and a low price / sales ratio is not an ideal choice. The high level of debt will have to be repaid at some point, which will lead to new issuance of shares, an increase in market capitalization and ultimately a higher price-to-sales ratio.
In any case, the price / sales ratio used in isolation cannot do the trick. Other ratios such as price / earnings, price / pound, and debt / equity should also be analyzed before making an investment decision.
Selling price lower than the median selling price for its industry: The lower the price / sale ratio, the better.
The price / earnings ratio using the F (1) estimate is lower than the median price / earnings ratio for its industry: The lower the better.
Reservation price (common shares) lower than the median reservation price for its industry: This is another parameter to ensure the value of a stock.
Debt to equity (most recent) lower than median Debt to equity for its industry: A business with less debt should have a stable price-to-sales ratio.
Current price greater than or equal to $ 5: The shares should trade at a minimum of $ 5 or more.
Rank of Zacks less than or equal to # 2: Zacks Rank # 1 (Strong Buy) or 2 (Buy) stocks are known to outperform regardless of the market environment.
Score value less than or equal to B: Our research shows that stocks with a value score of A or B when combined with a rank 1 or 2 of Zacks offer the best opportunities in the value investing space.
Here are seven of the 30 actions that qualified the screening:
Bassett Furniture Industries BSET is a home furnishings retailer with operations in the United States and internationally. She is engaged in the design, manufacture, sourcing, distribution and sale of home furnishings products to a network of Bassett Home Furnishings retail stores owned by the company and licensees, as well as independent furniture retailers; and wood and upholstery operations. The stock currently has a value score of B and a rank of Zacks # 1. It has a 3 to 5 year EPS growth rate of 16%.
Korean Electric Power Company KEP is an integrated electric utility company that generates, transmits and distributes electricity in Korea and abroad. Headquartered in Naju, South Korea, the company produces electricity from nuclear, coal, petroleum, liquefied natural gas, internal combustion, combined cycle, combined cycle integrated gasification, l hydro, wind, solar, fuel cells, biogas and other sources. The stock currently has a Zacks Rank # 1 and Value Score of A. It has a 3-5 year EPS growth rate of 5%.
Preferred Apartment Communities, Inc. APTS is a Maryland corporation formed primarily to own and operate multi-family properties. It also owns and operates, to a lesser extent, strategically located and well-leased student housing, grocery-anchored shopping malls and Class A office buildings, all in selected target markets across the United States. . The stock currently has a Zacks Rank # 2 and a Value Score of A.
Lakeland Industries, Inc. LAKE is a manufacturer and seller of industrial protective clothing and accessories for the global industrial and public protective clothing market. It offers limited use / disposable protective clothing; premium chemical protective suits to provide protection against highly concentrated, toxic and / or fatal chemicals and biological toxins; and fire fighting and heat protective clothing to protect against fire. It sells its products to a network of 1,600 distributors of safety products and industrial supplies through internal sales teams, a customer service group and independent sales representatives. The stock currently has a value score of B and a rank of Zacks # 1. You can see The full list of today’s Zacks # 1 Rank stocks here.
China Petroleum & Chemical Corporation SNP or Sinopec, headquartered in Beijing, China, is one of the largest oil and petrochemical companies in Asia. The company is the second largest producer of crude oil and natural gas, and the largest refiner and distributor of refined petroleum products in China. The company is also the largest producer and distributor of petrochemicals in the country. The stock currently has an A value score and a # 1 Zacks rank.
DCP, LP intermediary partners DCP owns and operates a portfolio of intermediate energy assets in the United States. It owns and operates approximately 44 natural gas processing plants and 51,000 miles of natural gas gathering and transmission networks. It serves petrochemical and refining companies, as well as retail propane distributors. The stock currently has a Zacks Rank # 1 and a Value Score of B.
Tucker, based on GA GMS Inc. GMS is a distributor of wall panels, suspended ceiling systems and complementary building products in the United States and Canada. It offers ceiling products, including suspended mineral fibers, flexible fibers and metal ceiling systems mainly used in offices, hotels, hospitals, retail businesses, schools and various other commercial and institutional buildings. The stock currently has an A value score and a Zacks rank 2.
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