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Zacks.com featured expert Kevin Matras highlights: Avnet, Cardinal Health, Comfort Systems, Gibraltar Industries and ScanSource

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Chicago, IL - December 16, 2015 - Stocks in this week's article include: Avnet ( AVT ), Cardinal Health ( CAH ), Comfort Systems ( FIX ) , Gibraltar Industries ( ROCK ) and ScanSource ( SCSC ) . Kevin Matras shows why stocks with new analyst coverage are stocks you want to have.

Screen of the Week written by Kevin Matras of Zacks Investment Research:

Why the P/S Ration Is My Favorite Valuation Metric

This week, I'm going to focus on the Price to Sales ratio for finding great stocks at great values.

The Price to Sales ratio is a great valuation metric. And given the recent run-up in stocks, value, to me, is becoming more and more important.

In fact, aside from the Zacks Rank, if I could only use one item to screen and pick stocks with, this item would be the one.

Definition

Let's first start with a definition.

The Price to Sales ratio is simply: Price divided by Sales

If the Price to Sales ratio is 1, that means you're paying $1 for every $1 of sales the company makes.

A price to sales ratio of 2 means you're paying $2 for every $1 of sales the company makes.

As you might have guessed, the lower the Price the Sales ratio, the better.

A price to Sales ratio of .5 means you're paying 50 cents for every $1 of sales the company makes.

And paying less than a dollar for a dollar's worth of something is a good bargain.

One of the reasons I like the Price to Sales ratio is because it looks at sales rather than earnings, like the P/E ratio does.

And sales are harder to manipulate on an income statement than earnings.

Secondly, I'd be hard pressed to find a screen where adding the Price to Sales ratio didn't improve it.

Price to Sales Study

For me, I prefer to look for stocks with a Price to Sales ratio under 1. Although, I'm willing to go up to 4, depending on the industry.

But in my testing, those with a Price to Sales ratio of 1 or less produced the best returns. Between 1 and 2 also outperformed pretty significantly. But once you got over 4, the odds were against you.

But the best way to use it, I've found, is to find stocks with a Price to Sales ratio below the median for its Industry. And that's what we'll be focusing on in this week's screen.

Screen Parameters

Projected Growth Rate greater than or equal to Projected Growth Rate for the S&P

(Above market growth rates.)

Last Earnings Surprise greater than 0

(Positive EPS Surprise)

Last Sales Surprise greater than 0

(Positive Sales Surprise)

Zacks Rank less than or equal to 2

(Only stocks with a Zacks Rank of a Strong Buy or Buy get through.)

Price to Sales less than or equal to Median Price to Sales for its Industry

(Valuations that are lower than their Industry.)

Price greater than or equal to $5

Avg. 20 Day Volume greater than or equal to 100,000

Stock Selections

Here are 5 stocks from this week's list:

( AVT ) Avnet

(P/S - 0.21)

( CAH ) Cardinal Health

(P/S - 0.27)

( FIX ) Comfort Systems

(P/S - 0.74)

( ROCK ) Gibraltar Industries

(P/S - 0.80)

( SCSC ) ScanSource

(P/S - 0.27)

Sign up now for your 2 week free trial to the Research Wizard and get the rest of the stocks on this list. Start using this screen and the Price to Sales ratio in your own trading. Or create your own strategies and test them first before you invest. Know what to buy and when to sell.

Learn how today with the Research Wizard.

Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: http://at.zacks.com/?id=111

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.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here http://at.zacks.com/?id=112

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AVNET (AVT): Free Stock Analysis Report

CARDINAL HEALTH (CAH): Free Stock Analysis Report

COMFORT SYSTEMS (FIX): Free Stock Analysis Report

GIBRALTAR INDUS (ROCK): Free Stock Analysis Report

SCANSOURCE INC (SCSC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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