price to sales ratio
ENBRIDGE INC. $32 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 776.4 million; Market cap: $24.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.enbridge.com) continues to win support from shippers for its proposed Northern Gateway pipeline, which would pump crude oil from Edmonton to a storage terminal in Kitimat, B.C. From there, the oil would be loaded onto tankers and shipped to Asia. Oil-sands operators have already pledged $100 million to the pipeline, which could cost $5.5 billion to build. Northern Gateway still faces strong opposition from environmentalists and Aboriginal groups, but if regulators approve, it could begin operating in 2017. Enbridge is a buy.
SUNCOR ENERGY INC. $30 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $48.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.5%; TSINetwork Rating: Average; www.suncor.com) became Canada’s largest integrated oil company in 2009, when it merged with Petro-Canada. Suncor gets 60% of its production from its oil sands projects in Alberta. The remaining 40% comes from conventional oil and natural gas properties. It also operates four refineries and 1,500 gas stations under the Petro-Canada banner.
Hedging delayed merger benefits
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Google has become one the world’s best-known brands since it was formed in 1998. For many Internet users, the Google search engine is the only way to find information online. Under Google’s business model, it gives away most of its products and services for free, then makes money by selling ads. Google is drawing advertisers away from traditional print and TV ads, because it is able to help advertisers zero in on potential customers. We feel Google still has plenty of growth ahead, particularly as it has only begun selling ads on its newer services, including its YouTube video-sharing site and Google+ social network. Moreover, the stock trades at only 16.9 times earnings. That’s cheap in light of the strength of Google’s brand and its vast growth potential. GOOGLE INC. $523 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 322.9 million; Market cap: $168.9 billion; Price-to-sales ratio: 5.0; No dividends paid; TSINetwork Rating: Above Average; www.google.com) is the world’s leading Internet search engine. Right now, the company has about two-thirds of the Internet search market. That’s because its well-developed search technology gives it an advantage over its competitors....
HEWLETT-PACKARD CO. $25 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 2.1 billion; Market cap: $52.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.hp.com) dropped sharply last month, after it announced a major transformation. Its plans include selling or spinning off its personal computer operations, which supply 30% of its revenue. Computer sales will probably continue to suffer as more people use smartphones and tablet devices to access the Internet. Meanwhile, intense competition is hurting this division’s profit margins. However, Hewlett will hang on to its highly profitable printing operations. The company also wants to sell more computer services and software to business clients. That’s why it is paying $10 billion for U.K.-based Autonomy Corp., which makes software that helps businesses organize emails, web pages and company documents....
Right now, the U.S. credit-rating industry is dominated by three firms: Standard & Poor’s (which is owned by McGraw-Hill, below), Moody’s and Fitch. However, Standard & Poor’s recent downgrade of U.S. Treasury bonds has drawn new attention to the entire industry. This increased scrutiny makes it more likely that regulators will open up the industry to more competition. Regulators could also force these firms to disclose how they make their decisions. Even with these challenges, we feel credit-rating providers like the three we analyze below will continue to play a vital role in the global economy. Moreover, the recent stock-market turmoil is prompting many investors to turn to bonds. That should continue to fuel demand for bond ratings, in particular. MCGRAW-HILL COMPANIES INC. $41 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 301.3 million; Market cap: $12.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.4%; TSINetwork Rating: Average; www.mcgraw-hill.com) gets 60% of its revenue from its Standard & Poor’s division, which provides financial information, including credit ratings on bonds. It gets 25% from publishing school textbooks. The remaining 15% comes from its media operations, which publish magazines and own nine television stations....
AGILENT TECHNOLOGIES INC. $33 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 348.1 million; Market cap: $11.5 billion; Price-to-sales ratio: 1.7; No dividends paid; TSINetwork Rating: Average; www.agilent.com) paid $1.5 billion for Varian Inc. in May 2010. This company makes testing equipment for medical-research labs. Demand for this equipment is less cyclical than Agilent’s electronic-testing products, so adding Varian cuts Agilent’s risk. Thanks mainly to Varian, Agilent’s revenue rose 22.2% in the three months ended July 31, 2011, to $1.7 billion from $1.4 billion a year earlier. Agilent earned $276 million, or $0.77 a share, up 44.5% from $191 million, or $0.54 a share. These figures exclude unusual items, such as costs to integrate Varian. The slowing economy could dampen Agilent’s growth. However, the company continues to spend around 10% of its revenue on research. This should give it a steady stream of new products to fuel its sales. As well, Agilent’s long-term debt of $2.2 billion is a moderate 19% of its market cap. It also holds cash of $3.1 billion, or $8.94 a share. That gives it plenty of room to keep buying other technology companies and developing new products....
MOLSON COORS BREWING CO. $43 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 187.3 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.0%; TSINetwork Rating: Average; www.molsoncoors.com) continues to build up its operations in emerging markets. That’s helping it offset slow beer sales in North America and Europe. In the past few years, Molson Coors has formed joint ventures with local brewers in China, Russia, Spain and Vietnam. The company recently announced that it would buy a controlling stake in Indian brewer Cobra Beer, and help Cobra expand its capacity. In all, this investment will cost Molson Coors $35 million. That’s equal to 15% of the $231.6 million, or $1.23 a share, that it earned in the three months ended June 30, 2011. Molson Coors already has a joint venture to distribute Cobra’s brands outside of South Asia, so this experience cuts the risk of this investment. As well, this new deal will help Molson Coors profit from rising beer consumption in India, which could double by 2020....
FAIR ISAAC CORP. $26 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 38.6 million; Market cap: $1.0 billion; Price-to-sales ratio: 1.6; Dividend yield: 0.3%; TSINetwork Rating: Average; www.fairisaac.com) makes FICO Scores and other software that businesses around the world use to make better decisions on customer creditworthiness. Its products also help credit-card issuers control fraud and analyze cardholders’ spending patterns. In its fiscal 2011 third quarter, which ended June 30, 2011, Fair Isaac’s earnings jumped 29.3%, to $23.2 million from $17.9 million a year earlier. Earnings per share rose 45.0% to $0.58 from $0.40, on fewer shares outstanding. The company’s ongoing cost cuts were the main reason for the higher earnings: operating expenses fell by $11 million in the latest quarter....
Shares of these two medical-device makers fell recently after their latest earnings missed expectations. However, the aging baby-boom generation should spur long-term demand for their products. C.R. BARD INC. $90 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 86.6 million; Market cap: $7.8 billion; Price-to-sales ratio: 2.8; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www.crbard.com) makes medical devices in four main areas: vascular products, such as stents and catheters (28% of 2010 sales); oncology products that detect and treat various types of cancer (27%); urology products, such as drainage and incontinence devices (26%); and surgical tools (16%). Other medical products supply the remaining 3%. The company recently agreed to settle various lawsuits related to faulty products for treating hernias. If you exclude these costs, as well as severance costs related to a recent restructuring plan, Bard would have earned $141.7 million in the three months ended June 30, 2011. That’s up 5.7% from $134.0 million a year earlier. Earnings per share rose 12.9%, to $1.57 from $1.39, on fewer shares outstanding....
WELLS FARGO & CO. $24 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 5.3 billion; Market cap: $127.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 2.0%; TSINetwork Rating: Average; www.wellsfargo.com) has agreed to settle a class-action lawsuit that accused Wachovia Corp. of failing to disclose the risks related to mortgage-backed securities it sold from 2006 to 2008. Wells Fargo bought Wachovia in 2008. Wells Fargo will pay $590 million to settle these claims. That’s equal to 16% of the $3.7 billion, or $0.70 a share, that Wells Fargo earned in the three months ended June 30, 2011. Wells Fargo is a hold.