7 Low Price-to-Sales Stocks to Buy in the Current Market
Price-to-sales is a convenient tool to gauge the value of stocks that are incurring losses or are in an early development cycle. Stocks like FL, GIII,...
A stock’s price-to-sales ratio reflects how much investors are paying for each dollar of revenue generated by a 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, 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.
Investment in stocks made after an analysis of valuation metrics is usually considered one of the best practices. When considering valuation metrics, the 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 the business. This underrated ratio is also used to identify a recovery situation or ensure that a company's growth is not overvalued.
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 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 also analyze other ratios like Price/Earnings, Price/Book, and Debt/Equity before arriving at any investment decision.
Price to Sales less than 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 Median Price to Earnings for its Industry: The lower, the better.
Price to Book (common Equity) less than 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 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: Zacks Rank #1 (Strong Buy) or 2 (Buy) 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 seven of the 45 stocks that qualified the screening:
Foot Locker, Inc. FL is a retailer of athletic shoes and apparel. The company operates websites and mobile apps, aligned with the brand names of store banners. In addition, Foot Locker has franchise operations in the Middle East. The company has two operating segments, North America and International. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5-year EPS growth rate of 4%.
New York-based GIII Apparel Group, LTD. GIII is a manufacturer, designer, and distributor of apparel and accessories under licensed brands, owned brands, and private label brands. The company’s portfolio includes outerwear, dresses, sportswear, swimwear, women’s suits, and women’s performance wear as well as women’s handbags, footwear, small leather goods, cold weather accessories, and luggage. G-III has a portfolio of more than 30 licensed and proprietary brands, including five global major brands — DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld. The stock currently has a Zacks Rank #1 and a Value Score of A. It has a 3–5 year EPS growth rate of 11.6%.
Nu Skin Enterprises, Inc. NUS develops and distributes a wide range of premium cosmetics, beauty, personal care, and wellness products. While the company specializes in beauty and personal care, it also provides a wide range of nutritional products. Nu Skin’s products are available in more than 50 markets worldwide. The stock currently has a Zacks Rank #2 and a Value Score of A.
MetLife, Inc. MET is an insurance-based global financial services company, providing protection and investment products to a range of individual and institutional customers. In addition to offering individual insurance, annuity, and investment products, the company provides group insurance, retirement and savings products, and services. The 3-5 year EPS growth rate for the stock is estimated at 7.5%. The stock currently has a Value Score of A and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Piper Sandler Companies PIPR operates as an investment bank and institutional securities firm. It primarily serves corporations, private equity groups, public entities, non-profit entities, and institutional investors in the United States and internationally. Its products and services include financial advisory services; equity and debt capital market products; public finance services; equity research and institutional brokerage; fixed income services; and private equity strategies. The stock currently has a Value Score of B and a Zacks Rank #1.
Hibbett, Inc. HIBB has evolved its offerings from sports goods to an athletic-inspired fashion-focused assortment. The company provides products for individual as well as team sports across several stores and its omni-channel platform. It emphasizes on providing a compelling collection of athletic-inspired fashion footwear, apparel, and accessories. The company operates predominantly in the South, Southwest, Mid-Atlantic, and Midwest regions of the United States. The stock currently has a Value Score of A and a Zacks Rank #2. The 3-5 year EPS growth rate for the stock is estimated at 22.4%.
Standard Motor Products, Inc. SMP is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. It majorly focuses on the heavy-duty industrial and original equipment market. The stock currently has a Value Score of A and a Zacks Rank #2.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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MetLife, Inc. (MET): Free Stock Analysis Report
Foot Locker, Inc. (FL): Free Stock Analysis Report
Hibbett, Inc. (HIBB): Free Stock Analysis Report
Standard Motor Products, Inc. (SMP): Free Stock Analysis Report
GIII Apparel Group, LTD. (GIII): Free Stock Analysis Report
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Piper Sandler Companies (PIPR): Free Stock Analysis Report
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