price to sales ratio

SAPUTO INC. $46 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 204.6 million; Market cap: $9.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.4%; TSINetwork Rating: Average; www.saputo.com) continues to use acquisitions to expand its dairy operations. Since it became a public company in 1997, it has spent roughly $2.8 billion buying related firms. Expanding by acquisition adds risk. However, Saputo usually buys smaller dairy companies that it can easily integrate with its existing operations. The company is now Canada’s largest producer of dairy products, including milk, butter and cheese. Its main brands include Neilson, Stella and Dairyland. Saputo also has operations in the U.S., Argentina and Europe. Dairy products account for 97% of Saputo’s sales. The remaining 3% comes from snack cakes and tarts.

U.S. is a prime target for Saputo

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ADOBE SYSTEMS INC. $34 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 504.5 million; Market cap: $17.2 billion; Price-to-sales ratio: 4.2; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) makes software that lets computer users create documents in the popular PDF format. It also makes software that lets graphic designers create print publications and web pages. In its 2011 first quarter, which ended March 4, 2011, Adobe earned $298.1 million. That’s up 40.8% from $211.7 million a year earlier. Earnings per share rose 45.0% to $0.58 from $0.40, on fewer shares outstanding. These figures exclude several unusual items, such as gains on investment sales and income-tax adjustments. Sales rose 19.7%, to a record $1.0 billion from $858.7 million. Sales rose across all of Adobe’s divisions except print and publishing, where sales fell 1.8%. The uncertain business environment in Japan following the earthquake and tsunami will probably cut Adobe’s second-quarter revenue by about $50 million. Japan is Adobe’s second-biggest source of revenue by country....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “How your stock research can benefit from price-to-sales ratios.” We display a price-to-sales or p/s ratio with every stock we cover in our newsletters, including Wall Street Stock Forecaster, our newsletter for investing in U.S. stocks....

YUM! BRANDS INC. $52 (New York symbol YUM Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 466.9 million; Market cap: $24.3 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.yum.com) operates 38,000 fast-food restaurants in over 110 countries. Its main banners include KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). It recently announced it will sell its Long John Silver’s (seafood) and its A&W (burgers) chains. Yum will soon make a formal offer to buy the 72.8% of Little Sheep Group Ltd. that it does not already own. This company operates 480 “hot pot” restaurants, mainly in China. Hot pot restaurants have special cooking pots at the centre of each table. Customers can serve themselves from the pots. Expanding in China is helping Yum offset slower growth in the U.S. In the first quarter of 2011, overall sales rose 3.4%, to $2.43 billion from $2.35 billion a year earlier. Excluding unusual items, earnings per share rose 6.8%, to $0.63 from $0.59....

MCDONALD’S CORP. $78 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.0 billion; Market cap: $78.0 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.mcdonalds.com) is the world’s largest fast-food restaurant chain by revenue. It has 32,800 restaurants that mainly serve hamburgers and french fries. Franchisees own 80% of these outlets. McDonald’s gets 65% of its sales from overseas. The company continues to profit from new menu items, such as breakfast oatmeal. As well, its premium coffees are helping it compete with Starbucks. In the quarter ended March 31, 2011, sales rose 8.9%, to $6.1 billion from $5.6 billion a year earlier. Overall same-store sales rose 3.6%. European same-store sales rose 4.9%, the U.S. rose 3.0% and the Asia-Pacific gained 0.5%. Earnings rose 10.9%, to $1.2 billion from $1.1 billion. Earnings per share rose 15.0%, to $1.15 from $1.00, on fewer shares outstanding....

QUAKER CHEMICAL CORP. $45 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 11.5 million; Market cap: $517.5 million; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; TSINetwork Rating: Average; www.quakerchem.com) makes lubricants and chemicals that keep mechanical parts from corroding. In the three months ended March 31, 2011, Quaker’s earnings rose 12.5%, to $10.9 million from $9.4 million a year earlier. Earnings per share rose 8.3%, to $0.91 from $0.84, on more shares outstanding. Sales rose 24.6%, to $159.9 million from $128.3 million. The company needs oil to make its products, so it has raised its selling prices to offset rising oil costs. This was the main reason for the higher sales. Sales volumes also rose 16%, partly due to an acquisition. Even so, higher raw material costs cut Quaker’s gross margin (gross profits as a percentage of sales) to 33.0% from 36.9%....

MTS SYSTEMS CORP. $45 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.3 million; Market cap: $688.5 million; Price-to-sales ratio: 1.7; Dividend yield: 1.8%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that tests materials, machines and structures. This helps manufacturers lower their costs and improve the quality of their products. The company is starting to see rising demand for its products as the economy recovers. In its 2011 first quarter, which ended January 1, 2011, MTS’s sales rose 19.0%, to $105.9 million from $89.0 million a year earlier. Earnings jumped 246.3%, to $13.3 million from $3.8 million. Earnings per share rose 273.9%, to $0.86 from $0.23, on fewer shares outstanding. That’s mainly because it is selling more products with high profit margins. As well, MTS set aside less money to cover potential warranty claims....

As part of our three-pronged investing approach, we’ve long recommended that you downplay stocks that are in the broker/media limelight. (We also recommend that you invest mainly in well-established, dividend-paying companies, and spread your investments out across the five main economic sectors.) International Flavors & Fragrances is a good example of a well-established, dividend-paying stock that gets little media attention. It began operating in 1909, and has played a vital role in developing some of the world’s top-selling foods and consumer products. We feel IFF’s close relationships with its clients will continue to fuel its growth, particularly in emerging markets. As well, the company’s high research spending is a hidden asset....

TUPPERWARE BRANDS CORP. $63 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 62.6 million; Market cap: $3.9 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) is another example of a well-established consumer-products stock that gets little media attention. Like IFF (this issue), Tupperware also has a long history of steady dividends. Starting next year, the company will increase its annual dividend rate in line with increases in its earnings. Meanwhile, Tupperware continues to see strong demand for its plastic food containers and beauty products, particularly in fast-growing countries like Brazil, Indonesia and Turkey....

These four small industrial companies should continue to benefit as the global economy grows. They are also market leaders, and their shares trade at attractive multiples to earnings. They also kept paying dividends during the recession. However, only two are buys right now. BRIGGS & STRATTON CORP. $23 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 50.3 million; Market cap: $1.2 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest lawnmower engine maker. This business accounts for 62% of Briggs’sales. It gets the remaining 38% of its sales by making other home and garden equipment, such as generators, pressure washers and snow blowers. The weak U.S. economy has weighed on Briggs’ sales. In response, the company recently closed a plant in Wisconsin. Due to $4.6 million in restructuring and refinancing charges, Briggs lost $1.3 million, or $0.03 a share, in its second quarter, which ended December 26, 2010. A year earlier, it earned $3.0 million, or $0.06 a share....