This underrated ratio is also used to identify a recovery situation or ensure that a company's growth is not overvalued. 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. 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. This is because calculations based on earnings are easy and come in handy. When considering valuation metrics, price-to-earnings ratio has always been the obvious choice. 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. 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. If the price-to-sales ratio is 1, it means that investors are paying $1 for every $1 of revenues generated by the company. Screen of the Week written by Kevin Matras of Zacks Investment Research:īet on These Low Price-to-Sales Stocks for Strong ReturnsĪ stock’s price-to-sales ratio reflects how much investors are paying for each dollar of revenues generated by the company. Kevin Matras screens for companies showing their 'first' profit and explains why they are ones to watch. CFX, MGM Growth Properties LLC MGP, Korea Electric Power Corp. Chicago, IL – January 31, 2019– Stocks in this week’s article include Colfax Corp.

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