price to sales ratio

Toyota and Honda have had to recall thousands of cars in the past few weeks to replace defective airbags made by Takata Corp. That’s because they could deploy too forcefully and injure drivers. However, the recalls are unlikely to hurt the companies’ sales. Both will also keep benefiting from the falling Japanese yen, which makes their overseas sales more valuable. TOYOTA MOTOR CO. ADRs $122 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.7 billion; Market cap: $207.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.toyota.com) is the world’s biggest carmaker by sales....

SONY CORP. ADRs $20 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.2 billion; Market cap: $24.0 billion; Price-to-sales ratio: 0.3; Dividend suspended in September 2014; TSINetwork Rating: Average; www.sony.com) recently lost digital copies of its upcoming movies to online intruders. If the thieves post these films on the Internet, it would likely hurt future sales of both cinema tickets and DVDs. The company also recently announced that it would stop making cheaper mobile phones for emerging markets and focus on higher-priced models for developed nations. Severance costs and other expenses will widen its expected loss to $1.38 per ADR in the year ending March 31, 2015, from $1.21 in 2014. Sony is still a hold....

General Electric and ABB Ltd. (see box) are refocusing on their industrial operations. That positions them to profit as both developed and emerging nations upgrade their power grids. GENERAL ELECTRIC CO. $24 (New York symbol GE; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap: $240.0 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.ge.com) recently agreed to form a major new alliance with France’s Alstom SA, a leading maker of electrical-transmission equipment and parts for power plants. Under the deal, GE will form three 50/50 joint ventures with Alstom. One will combine the companies’ electrical grid operations, while a second will focus on products for renewable energy projects, like offshore wind farms. The third will hold Alstom’s nuclear-equipment division....

ABB LTD. ADRs $21 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $48.3 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for power utilities. The Switzerland-based firm also produces automation systems and robotics that its industrial clients use to improve their productivity. In the three months ended September 30, 2014, ABB’s revenue fell 6.8%, to $9.8 billion from $10.5 billion a year earlier. That’s mainly due to slowing demand for transmission gear in Europe. Earnings declined 12.1%, to $734 million from $835 million. ABB continues to buy back shares and recently earmarked $4 billion for future repurchases. Due to fewer shares outstanding, earnings per ADR fell 11.1%, to $0.32 from $0.36 (each American depositary receipt represents one ABB common share). The company aims to improve its profitability by selling non-essential businesses. It’s also turning down riskier, lessprofitable orders. These moves should boost its earnings per ADR from a projected $1.20 in 2014 to $1.41 in 2015. The stock trades at 14.9 times the 2015 forecast. The $0.77 dividend yields 3.7%....

STANLEY BLACK & DECKER INC. $94 (New York symbol SWK; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 156.7 million; Market cap: $14.7 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.2%; TSINetwork Rating: Average; www.stanleyblack anddecker.com) earned $249.1 million in the third quarter of 2014, up 12.7% from $221.1 million a year earlier. Earnings per share rose 11.5% to $1.55 from $1.39, on more shares outstanding. Sales gained 5.2%, to $2.9 billion from $2.8 billion, as Stanley released new tools for consumers and industrial users. It also raised its prices. That offset lower sales of building-security systems, particularly in Europe, and the negative impact of currency exchange rates. Stanley Black & Decker is a buy....

C.R. BARD INC. $166 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 74.9 million; Market cap: $12.4 billion; Price-to-sales ratio: 3.9; Dividend yield: 0.5%; TSINetwork Rating: Above Average; www. crbard.com) makes over 15,000 medical devices in four main areas: oncology products that detect and treat various types of cancer (28% of 2013 sales); vascular products, like stents and catheters (27%); urology goods, such as drainage and incontinence devices (26%); and surgical tools (16%). Other medical products supply the remaining 3%. The company’s products are typically only used once, so customers must continually buy new ones. Acquisition targets fit well...

BAXTER INTERNATIONAL INC. $67 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 542.0 million; Market cap: $36.3 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.9%; TSINetwork Rating: Average; www.baxter.com) continues to expand overseas, which helps cut its exposure to the 2.3% excise tax it must pay on sales of medical devices as part of the Affordable Care Act (or Obamacare). In 2012, overseas markets supplied 58% of Baxter’s revenue.

The company recently completed its $3.7-billion purchase of Gambro AB, a Swedish dialysis-product maker. Gambro looks like a nice fit with Baxter’s intravenous pumps and other medical equipment. This division supplies 55% of its total revenue. The remaining 45% comes from its BioScience division, which produces vaccines and drugs.

In the three months ended September 30, 2013, Baxter’s revenue rose 8.5%, to $3.8 billion from $3.5 billion a year earlier. Gambro supplied $100 million of that total, which helped push up the medical products division’s sales by 10.2%. BioScience revenue rose 6.4% on strong demand for the division’s Advate hemophilia drug.
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MTS SYSTEMS CORP. $68 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.4 million; Market cap: $1.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.8%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that manufacturers use to test the behaviour of materials, machines and structures. This helps its customers reduce errors and costs. Like 3M (see page 1), MTS is also spending more to develop new products.

In the fiscal year ended September 28, 2013, MTS’s revenue rose 5.0%, to $569.4 million from $542.3 million a year earlier. Earnings fell 5.4%, to $3.49 a share from $3.69, partly due to a 4.2% jump in research spending. MTS now devotes around 4% of its revenue to developing new products.

The company expects its fiscal 2014 earnings to improve to $3.55 to $3.70 a share. The stock trades at a reasonable 18.8 times the midpoint of that range.
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ENCANA CORP. $18 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 740.1 million; Market cap: $13.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.6%; TSINetwork Rating: Average; www.encana.com) plans to spend $2.4 billion to $2.5 billion on its properties in 2014. That’s down from the $2.8 billion it will likely spend in 2013.

Encana will devote 75% of its 2014 spending to five properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and the Tuscaloosa Marine Shale (Louisiana).

These fields produce significant amounts of oil and natural gas liquids (NGLs), such as butane and propane. The company expects oil and NGLs to supply 75% of its cash flow by 2017, up from about 35% today.
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A key part of our three-pronged investing strategy is to downplay stocks in the broker/media limelight (the other two are invest mainly in well-established companies and spread your money across the five main economic sectors). Linamar is a good example of an out-of-the-limelight stock. Few brokers cover it, partly because its cyclical auto and industrial parts are not as exciting as, say, computer technologies. As well, the family of Linamar’s founder own 23.6% of the outstanding shares, which limits the possibility of a takeover. However, the company’s expertise helped it rebound strongly from the 2008 financial crisis and the bankruptcy of GM and Chrysler, two of its biggest clients. Today, it’s winning deals to supply engine parts to other automakers and industrial firms, and growing beyond North America. Linamar also stands to gain as carmakers rely more heavily on suppliers to help them meet tougher emission regulations....