For Immediate Release
Chicago, IL –November 4, 2019 - Stocks in this week’s article are MGM Growth Properties LLC MGP, AZZ Inc. AZZ, Pampa Energia S.A. PAM, TrueBlue, Inc. TBI and Green Dot Corporation GDOT.
Add These Value Price-to-Sales Stocks for Solid Returns
A stock’s price-to-sales ratio reflects how much investors are paying for each dollar of revenues generated by the company.
If the price-to-sales ratio is 1, it means that investors are paying $1 for every $1 of revenues generated by the company. So, it goes without saying that 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.
When considering valuation metrics, price-to-earnings ratio has always been the obvious choice. This is because calculations based on earnings are easy and come in handy. However, price-to-sales has emerged as a convenient tool to determine the value of stocks that are incurring losses or are in an early cycle of development, generating meager or no profits.
While a loss-making company with a negative price-to-earnings ratio falls out of investor favor, its price-to-sales could indicate the hidden strength of its business. This underrated ratio is also used to identify a recovery situation or ensure that a company's growth is not overvalued.
Price-to-sales 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 high debt and low price-to-sales is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance, 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 also analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/598291/add-these-7-value-pricetosales-stocks-for-solid-returns
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Pampa Energia S.A. (PAM) : Free Stock Analysis Report
AZZ Inc. (AZZ) : Free Stock Analysis Report
MGM Growth Properties LLC (MGP) : Free Stock Analysis Report
TrueBlue, Inc. (TBI) : Free Stock Analysis Report
Green Dot Corporation (GDOT) : Free Stock Analysis Report
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