Yahoo Finance Buy These 5 Low Price-to-Sales Stocks for a Promising 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 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.
GIII Apparel Group, Ltd. GIII, Caleres CAL, Pampa Energia S.A. PAM, ProPetro Holding Corp. PUMP and The Greenbrier Companies, Inc. GBX 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 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.
In the near 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.
Pampa Energia is an independent energy-integrated company in Argentina. Through its subsidiaries, the company is engaged in the generation, transmission and distribution of electricity in Argentina. PAM operates through Electricity Generation, Oil and Gas, Petrochemicals, and Holding and Other Business segments. It generates electricity through thermal generation plants, thermal gas-fired generation plants and hydroelectric power generation systems, as well as a wind farm.
The company also explores for and produces oil and gas, and operates a high-voltage electricity transmission network. It also produces petrochemicals, such as styrene, styrene-butadiene rubber and polystyrene. In addition, it engages in gas transportation and advisory services activities. PAM currently has a Zacks Rank #1 and a Value Score of A.
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.
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 fleet 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.
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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.
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Pampa Energia S.A. (PAM) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
Greenbrier Companies, Inc. (The) (GBX) : Free Stock Analysis Report
Caleres, Inc. (CAL) : Free Stock Analysis Report
ProPetro Holding Corp. (PUMP) : Free Stock Analysis Report
