price to sales ratio

These three companies are trading near their alltime highs. That’s partly because the improving economy is giving their main clients— banks and financial services firms— more to spend on their hard-toreplace services. As well, all three are tapping into the “big data” trend, helping businesses capture and analyze a lot of information about their operations. We like the long-term outlook for all three, but we see only two as buys right now. DUN & BRADSTREET CORP. $128 (New York symbol DNB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 36.0 million; Market cap: $4.6 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.4%; TSINetwork Rating: Average; www.dnb.com) provides credit reports on over 230 million companies. Its clients use this information to make lending and buying decisions....

MCDONALD’S CORP. $97 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 958.5 million; Market cap: $93.0 billion; Price-to-sales ratio: 3.5; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.mcdonalds .com) earned $811.5 million in the three months ended March 31, 2015, down 32.6% from $1.2 billion a year earlier. Per-share profits fell 30.6%, to $0.84 from $1.21, on fewer shares outstanding. The company is closing less-profitable restaurants, simplifying its menus and speeding up its drive-through lanes as part of a new restructuring plan. If you exclude unusual items and the negative impact of currency exchange rates, McDonald’s earned $1.10 a share in the latest quarter. Sales fell 11.1%, to $6.0 billion from $6.7 billion. A drop in customer traffic cut same-store sales by 2.3%....

CISCO SYSTEMS INC. $29 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.1 billion; Market cap: $147.9 billion; Price-to-sales ratio: 3.0; Dividend yield 2.9%; TSINetwork Rating: Average; www.cisco.com) has seen falling sales of routers and other computer-networking equipment in China in the past few years. That’s largely because of fears that U.S. intelligence agencies are secretly using the company’s gear to spy on foreign firms and governments. In the quarter ended April 25, 2015, Cisco’s Chinese sales fell 20% from a year earlier. The company now aims to reverse the decline by investing in new partnerships with Chinese universities and other institutions. This should help Cisco develop new equipment to compete with products from domestic firms like Huawei Technologies....

FEDEX CORP. $173 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 283.8 million; Market cap: $49.1 billion; Price-to-sales ratio: 1.1; Dividend yield: 0.6%; TSINetwork Rating: Average; www.fedex.com) delivers packages and documents in the U.S. and 220 other countries through a fleet of 650 planes and 108,000 trucks and other ground vehicles. The company recently agreed to buy TNT Express NV, a Netherlands-based courier that operates throughout Europe. FedEx’s main rival, United Parcel Service (UPS), tried to buy TNT in 2012, but antitrust regulators rejected the deal because it would have given UPS too much of Europe’s courier market. Combined, FedEx and TNT would have about 17% of this business, so regulators will likely approve this purchase....

Faulty airbag inflators made by Takata Corp. have forced Toyota to recall 8.1 million vehicles since 2008, while Honda has had to fix 20 million cars. However, these recalls likely won’t damage Toyota and Honda’s reputations or sales, as other big carmakers have also used Takata’s defective equipment. Meanwhile, both companies should keep benefiting from a low Japanese yen, which makes their products cheaper in foreign markets. TOYOTA MOTOR CO. ADRs $135 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.6 billion; Market cap: $216.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.toyota.com) is the world’s largest carmaker....

INTEL CORP. $32 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 4.7 billion; Market cap: $150.4 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.intel.com) has purchased Recon Instruments, a privately held Vancouver firm that makes heads-up displays for sports goggles and other specialized eyewear. This is a small acquisition for Intel: the $175-million purchase price is just 9% of the $2.0 billion, or $0.41 a share, the chipmaker earned in the three months ended March 28, 2015. However, Recon’s technology will help Intel profit from rising sales of wearable devices, such as wristwatches that monitor heart rates and other biological data. Intel is a buy....

PEPSICO INC. $95 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $142.5 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) earned $1.25 billion in the three months ended March 21, 2015, down 1.6% from $1.27 billion a year earlier. The company spent $1.1 billion on share buybacks in the latest quarter. As a result, earnings per share were unchanged at $0.83. Sales declined 3.2%, to $12.2 billion from $12.6 billion. If you exclude businesses PepsiCo bought and sold in the past year, as well as unfavourable currency exchange rates (overseas markets supply 40% of the company’s sales), revenue rose 4.4%. PepsiCo is still seeing strong demand for its snack foods, particularly in developing countries. However, soft drink sales have suffered as increasingly health-conscious consumers drink less soda....

TEXAS INSTRUMENTS INC. $54 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.0 billion; Market cap: $54.0 billion; Price-to-sales ratio: 4.3; Dividend yield: 2.5%; TSINetwork Rating: Average; www.ti.com) gets 65% of its revenue from analog chips, which convert inputs like touch, sound and pressure into signals computers can understand. Manufacturers use these chips in a variety of products, such as cars, medical devices and appliances. The company gets a further 20% of its revenue by making embedded processor chips, which perform mathematical calculations. Many clients supply their own software for these chips. This gives Texas Instruments an opportunity to form long-term relationships with these users, as it helps them adapt their software to the new chips. That makes these customers less likely to switch to other chipmakers. Handheld calculators, specialized chips and licensing fees provide the remaining 15% of revenue....

LOBLAW COMPANIES LTD. $64 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 412.6 million; Market cap: $26.4 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.loblaw.ca) is Canada’s largest food retailer, with 1,140 stores. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills. George Weston Ltd. (Toronto symbol WN) owns 46% of Loblaw.

In March 2014, the company acquired the 1,250-store Shoppers Drug Mart chain for $12.3 billion in cash and shares. Thanks largely to this purchase, Loblaw’s sales jumped 38.2%, from $30.8 billion in 2010 to $42.6 billion in 2014.

Merger savings help pay down debt

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BOMBARDIER INC. (Toronto symbols BBD.A $2.55 and BBD.B $2.53; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $4.4 billion; Price-to-sales ratio: 0.3; Dividend suspended in February 2015; TSINetwork Rating: Extra Risk; www.bombardier.com) plans to sell shares in its transportation division to the public. This business makes passenger railcars and accounts for 45% of Bombardier’s total revenue.

The company expects to complete the sale in the fourth quarter of 2015. The new shares will mainly trade on Germany’s stock exchange because that’s where this business is based. Bombardier will retain a majority stake in this new company.

Bombardier also recently suspended its dividend and sold new shares to shore up its balance sheet. The cash should help the company finish developing its new CSeries jet. Bombardier has firm orders for 243 CSeries planes. If buyers exercise their options and other agreements, that figure would rise to 603 aircraft with a total value of about $39 billion U.S.

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