For Immediate Release
Chicago, IL – May 29, 2018 - Stocks in this week’s article United Natural Foods, Inc. UNFI, Metlife Inc. MET, ArcelorMittal MT, Louisiana-Pacific Corp. LPX and Domtar Corporation UFS.
Valuable Low Price-to-Sales Stocks to Garner Good Profits
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 versus a stock with a high price-to-sales ratio.
When considering valuation metrics, price-to-earnings ratio has always been the obvious choice as 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, 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 and a rise in market cap and ultimately a higher price-to-sales ratio.
In any case, the price-to-sales ratio used in isolation can’t 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/305028/7-valuable-low-pricetosales-stocks-to-garner-good-profits
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Louisiana-Pacific Corporation (LPX) : Free Stock Analysis Report
United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
MetLife, Inc. (MET) : Free Stock Analysis Report
Domtar Corporation (UFS) : Free Stock Analysis Report
ArcelorMittal (MT) : Free Stock Analysis Report
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