Investing in stocks after a valuation metrics analysis is generally considered to be one of the best practices. When considering valuation metrics, the price / earnings ratio has always been the obvious choice. Indeed, calculations based on income are easy and useful. However, the sell price has become a practical tool for determining the value of stocks that suffer losses or are in an early cycle of development, 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.
The price-to-sales ratio of a stock reflects the amount that investors pay for every dollar of income generated by a business.
If the price / sale ratio is 1, investors pay $ 1 for every $ 1 of income generated by the business. So a stock with a price-to-sell ratio of less than 1 is a good deal because 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.
MarineMax, Inc. HZO, CalÃ¨res Inc. CAL, The Mosaic Company MOS, TravelCenters of America Inc. AT and Standard Motor Products, Inc. SMPs are stocks with a low price / sell ratio and the potential to offer higher returns.
The price-to-sales ratio is often preferred over the price-to-earnings ratio because companies can manipulate their profits using a variety of 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-to-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 an F (1) estimate lower than the median price / earnings ratio for its industry: The lower the better.
Reservation price (ordinary shares) lower than the median reservation price for its industry: This is another parameter to ensure the value of a security.
Debt to equity (most recent) lower than the 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 stocks 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 Zacks # 1 or 2 ranking, offer the best opportunities in the value investing space.
Here are the five stocks of the 39 that qualified for screening:
MarineMax is a retailer of pleasure craft and yachts in the United States. The company sells new and used pleasure craft, including pleasure craft, boats and pleasure craft; mega-yachts, sport yachts and other yachts; fishing boats; motor and convertible yachts; pontoon boats; fishing boats; ski boats; and jet boats.
MarineMax also supplies marine parts and accessories, boat covers, trailer parts, water sports accessories, high performance accessories and a range of boating accessories. HZO currently has a Zacks Rank # 2 and a Value Score of A.
CalÃ¨res is a leading shoe retailer and wholesaler in the United States, China, Canada, China, and Guam. It operates through the Famous Footwear and Brand Portfolio segments.
Caleres offers licensed, branded and private label athletic, casual and dress footwear for women, men and children. CAL currently has a Zacks # 1 ranking and a value score of B.
based in minnesota The Mosaic Company is a leading producer and distributor of phosphate and potash concentrates for the global agricultural industry. It was formed through the combination of the fertilizer businesses of food giant Cargill Incorporated and IMC Global Inc.
Mosaic is the world’s largest integrated phosphate producer and is also one of the world’s four largest potash producers. The 3-5 year BPA growth rate for MOS is estimated to be 7%. The stock currently has an A value score and a Zacks rank 2. You can see The full list of today’s Zacks # 1 Rank stocks here.
Travel Centers of America operates stand-alone travel centers and restaurants in the United States and Canada. Its travel centers offer a range of products and services, including diesel fuel and gasoline, diesel exhaust fluid, truck repair and maintenance, and highway services.
TravelCenters of America also operates full-service and quick-service restaurants, as well as a variety of guest amenities. It operates franchised restaurants. TA currently has an A value score and a # 1 Zacks rank.
Standard Motor Products is a leading manufacturer, distributor and distributor of premium automotive aftermarket parts for engine management and temperature control systems.
Standard Motor Products is primarily focused on the heavy-duty industrial and original equipment market. SMP currently has an A value score and a # 1 Zacks rank.
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