Low Price,sales Ratio a Big Plus

By Dorfman, John | Tribune-Review/Pittsburgh Tribune-Review, July 31, 2012 | Go to article overview

Low Price,sales Ratio a Big Plus


Dorfman, John, Tribune-Review/Pittsburgh Tribune-Review


Why did I ever stop?

From 1998 through 2006, I published nine sets of recommendations for stocks with a low price/sales ratio. This measure resembles the familiar price/earnings ratio except that instead of dividing a stock's price by its earnings per share, you divide by its sales (revenue) per share.

Of the nine lists, six beat the Standard & Poor's 500 Index, and all nine were profitable. The average return was more than 47 percent, compared with 4.1 percent for the S&P 500.

My batting average was inflated by a very lucky year in 2000. Bear in mind that past performance doesn't guarantee future results. The figures are hypothetical and do not include transactions costs or taxes. And performance for my column recommendations should not be confused with results for any real-money portfolio I run.

Now I'm resuming this series of articles and have five stocks with low price/sales ratios to recommend. I consider a stock cheap if it sells for less than 1.0 times sales, and very cheap at 0.5 or less, although that varies to some extent depending on the industry. The average stock sells for about 1.3 times sales.

Stocks that look undervalued on this measure are often turnaround candidates. They frequently are established businesses with big customer bases. But they have been unable to turn their revenue flow into robust profits.

World Fuel Services Corp. (INT) of Miami provides fuel, maps, weather reports and other services to planes large and small around the world. It has one of the lowest price/sales ratios around, 0.08.

Since the world isn't totally crazy, you might guess that World Fuel's profit margins are low. That is correct: The operating margin was about 0.7 percent last year. Even so, I think the stock is attractively cheap. It's worth noting that the company has been profitable in each of the past 10 years, with rising profits in nine of those years. Right now, investors are worried about whether Europe will pull the whole world into a recession. My best guess is that it won't, and that aviation activity will be rising in 2013- 2014.

GT Advanced Technologies Inc. (GTAT) of Merrimack, N.H., makes furnaces to melt silicon and purify silicon used in solar panels; it also makes furnaces used to create artificial sapphires used in LED lighting. At less than four times earnings and 0. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Low Price,sales Ratio a Big Plus
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.