Market Overview

9 Stocks Trading At The Steepest Discount To Sales

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9 Stocks Trading At The Steepest Discount To Sales

Traditional value investors have historically focused much of their attention on PE ratio, a measure of how much investors are paying for each dollar of income a company reports. However, growth stocks have outperformed value stocks for more than 10 years now, and value investors are now paying much more attention to metrics like price-to-sales ratio.

Price-to-sales is a company’s market cap divided by its total revenue over the past 12 months. Like PE, price-to-sales is a valuation metric, but it helps in comparing growth stocks to value stocks by looking at revenue rather than earnings.

Many growth stocks are generating little or no earnings because they are investing cash flow into growing the business. Amazon.com, Inc. (NASDAQ: AMZN) is a perfect example of a stock that demonstrated little or no earnings for years while it was building and expanding its business.

Price-to-sales ratio can be an important way to measure the potential of a stock based on the amount of business a company is doing. Different businesses have different margins, so revenue isn’t necessarily indicative of potential future income. However, price-to-sales can be particularly helpful in comparing different companies within the same business.

Lowest P/S Ratios

Here are the nine S&P 500 stocks with the lowest price-to-sales ratios, according to Finviz:

  1. AmerisourceBergen Corp. (NYSE: ABC), 0.10 P/S.
  2. Cardinal Health Inc (NYSE: CAH), 0.10 P/S.
  3. McKesson Corporation (NYSE: MCK), 0.12 P/S.
  4. Kroger Co (NYSE: KR), 0.17 P/S.
  5. Macy's Inc (NYSE: M), 0.21 P/S.
  6. Ford Motor Company (NYSE: F), 0.23 P/S.
  7. Owens-Illinois Inc (NYSE: OI), 0.25 P/S.
  8. Centene Corp (NYSE: CNC), 0.27 P/S.
  9. American Airlines Group Inc (NASDAQ: AAL), 0.27 P/S.

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