30 Stocks on Sale
By David Peltier
RealMoney.com Contributor
5/29/2007 2:01 PM EDT
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With nearly 2,500 stocks on the major U.S. exchanges that have a market capitalization of at least $500 million, I often use stock-screening tools to sift through and find the best values in the market.
Screens can be particularly helpful in the value arena, where I can use popular metrics like price-to-book value, price-to-earnings and price-to-sales ratios to stack companies up against their peers.
But running a stock screen is just the initial step that ultimately leads to an investment decision. Just because a company looks cheap on previously reported numbers doesn't mean that earnings, sales and net worth aren't currently declining.
When doing your research on value stocks, it's also important to identify upcoming potential catalysts, because a value stock that's below the radar may remain undervalued until the company has something to say that makes investors take notice.
This screen focuses on the price-to-sales ratio, or P/S, which is the last of the three major value metrics. Although the market is a discounting mechanism, and thus usually interested in forward-looking numbers, it's common to use trailing 12-month revenue in this measure.
The price-to-earnings ratio (P/E), which I screened in the April 24 Value Investor newsletter, is the most popular of the three value metrics, although it is used for stocks of all shapes and sizes.
On April 10, I screened for price-to-tangible book value, the final member of the value screen triumvirate, because a company's hard asset value truly does place a floor on valuation.
On the other hand, many sectors -- especially retail -- often carry a price-to-sales ratio of less than 1, meaning a company's market capitalization is less than its annual sales.
With that in mind, I further quantified this week's list of stocks by screening for companies that generated positive operating margin and operating cash-flow growth in the most recent quarter.
All of the stocks in the table below are from the universe of 2,374 companies based in the U.S. that have a market capitalization of at least $500 million.
Once again this week, I've presented a list of names of various investment sizes: 10 stocks each of the cheapest large-caps, mid-caps and small-caps, ranked by the price-to-sales ratio. As with any ideas, particularly value ideas, readers should do their own homework before making any investment decisions.
Scouting Out Value: 30 Stocks on Sale
Sifting by the price-to-sales Ratio
Large-Caps Market Capitalization (Mln. $) Operating Cash-Flow Growth (MRQ*) Operating Margin Growth (MRQ) Price/LTM Sales*
Supervalu (SVU) $9,965.00 114% 286% 0.27
AMR (AMR) $6,495.90 14% 112% 0.29
Cardinal Health (CAH) $27,606.20 233% 0% 0.32
Kroger (KR) $21,015.40 264% 9% 0.32
Manpower (MAN) $7,291.60 38% 12% 0.4
Avnet (AVT) $6,321.00 9270% 21% 0.42
Valero Energy (VLO) $40,608.90 8% 39% 0.45
Health Net (HNT) $6,518.40 55% 4% 0.5
Sysco (SYY) $20,738.60 26% 4% 0.6
Johnson Controls (JCI) $21,821.50 23% 19% 0.66
Mid-Caps
UAL Corp. (UAUA) $4,135.70 46% 3% 0.22
US Airways Group (LCC) $3,060.70 53% 84% 0.26
Solectron (SLR) $3,045.90 100% 25% 0.27
Dillard's (DDS) $3,053.40 2% 4% 0.4
Dean Foods (DF) $4,178.10 525% 6% 0.41
Oneok (OKE) $5,651.80 10% 18% 0.48
Anixter International (AXE) $2,581.70 410% 22% 0.5
Avis Budget Group (CAR) $2,881.20 0% 37% 0.5
Ryder System (R) $3,297.20 116% 11% 0.52
Wesco International (WCC) $2,895.80 133% 2% 0.53
Small-Caps
Kelly Services (KELY.A) $1,014.60 28% 2% 0.18
Performance Food Group (PFGC) $1,224.90 7% 18% 0.21
Rush Enterprises (RUSH.B) $569.00 27% 8% 0.24
Spartan Stores (SPTN) $612.90 34% 9% 0.26
Charter Communications (CHTR) $1,471.10 27% 56% 0.26
Fred's (FRED) $588.60 37% 3% 0.33
United Stationers (USTR) $1,860.90 135% 46% 0.41
Stein Mart (SMRT) $633.80 5% 5% 0.42
Ruddick (RDK) $1,472.50 8% 3% 0.43
Gentiva Health Services (GTIV) $527.90 6% 41% 0.45
(MRQ = most recent quarter; LTM = latest 12 months)
Source: Capital IQ
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