Zacks.com featured highlights include: Boot Barn, Kirkland, Ally, Alibaba and Zumiez
For Immediate Release
Chicago, IL – September 11, 2019 - Stocks in this week’s article are Boot Barn Holdings, Inc. BOOT, Kirkland Lake Gold Ltd. KL, Ally Financial Inc. ALLY, Alibaba Group Holding Ltd. BABA and Zumiez Inc. ZUMZ.
Valuable Low Price-to-Sales Picks for a Rewarding Portfolio
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.
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.
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/510976/bet-on-these-5-momentum-stocks-with-driehaus-strategy
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Alibaba Group Holding Limited (BABA): Free Stock Analysis Report
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Kirkland Lake Gold Ltd. (KL): Free Stock Analysis Report
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