price to sales ratio
INTERNATIONAL BUSINESS MACHINES CORP. $160 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $192.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.ibm.com) has moved down from its all-time high of $167.72 in March 2011. That’s mainly because of the earthquake and tsunami in Japan. IBM gets 11% of its sales from Japan, so sales of mainframe computers and services to Japanese customers will suffer while the country rebuilds. However, strong demand in China and other emerging markets, like Russia and Brazil, should offset any drop in Japanese sales. By 2015, IBM feels these markets will supply 30% of its overall revenue. IBM is still a buy.
ARCHER DANIELS MIDLAND CO. $36 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 637.3 million; Market cap: $22.9 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.adm.com) processes corn, wheat, soybeans, canola, peanuts and other crops into a wide variety of food ingredients, such as flour, oils and sweeteners. The company mainly sells its products to firms that make and process food. It has over 240 processing plants in more than 60 countries. Archer Daniels is also the largest maker of ethanol from corn in the U.S. Ethanol is a gasoline additive that lowers harmful emissions.
Growing opposition to subsidies
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Stocks in the Utilities sector usually appeal mainly to conservative and income-seeking investors. That’s because these firms’ operations (such as power plants and pipelines) generate steady cash flows that help them pay above-average dividends. However, some utilities also offer opportunities for growth. Emera is good example. In the past few years, the company has aggressively expanded outside its home province of Nova Scotia. These investments should pay off for years to come. EMERA INC. $31 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 114.7 million; Market cap: $3.6 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.2%; TSINetwork Rating: Average; www.emera.com) gets 75% of its revenue and 65% of its earnings from Nova Scotia Power Inc., which is Nova Scotia’s main electricity supplier....
PENGROWTH ENERGY CORP. $12 (Toronto symbol PGF; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 326.0 million; Market cap: $3.9 billion; Price-to-sales ratio: 2.4; Dividend yield: 7.0%; TSINetwork Rating: Average; www.pengrowth.com) produces oil and natural gas from properties in Alberta, B.C. and Saskatchewan. Natural gas accounted for 62% of Pengrowth’s production in 2010. Oil provided the remaining 38%. In 2010, Pengrowth’s cash flow rose 9.9%, to $606.0 million from $551.4 million in 2009. However, cash flow per share fell 3.8%, to $2.01 from $2.09, on more shares outstanding. The gain was mainly due to a 6.8% rise in the average price the company received per barrel of oil equivalent (including natural gas). That offset a 6.1% drop in its average daily production after it sold some properties in 2009. Low natural gas prices have held back the stock in the past few weeks, even as oil prices jumped in response to the turmoil in the Middle East....
Canada’s big telephone companies face strong competition from cable companies and new entrants in the wireless market. However, their traditional phone businesses continue to provide strong cash flows. That’s letting them upgrade their networks, and maintain or increase their dividends. BCE INC. $35 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 752.3 million; Market cap: $24.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.6%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. The company’s main subsidiary, Bell Canada, has 6.5 million residential and business customers in Ontario and Quebec. BCE sells wireless services to 7.2 million subscribers across Canada. As well, it has 2.1 million high-speed Internet customers and 2.0 million satellite-TV subscribers....
RESEARCH IN MOTION LTD. $63 (Toronto symbol RIM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 521.8 million; Market cap: $32.9 billion; Price-to-sales ratio: 1.8; No dividends paid; TSINetwork Rating: Above Average; www.rim.com) should see greater demand for its BlackBerry smartphones as a result of improvements to the speed and geographic reach of wireless networks in Canada. As well, faster wireless connections improve the prospects for RIM’s upcoming PlayBook tablet computer. This device faces strong competition from the Apple iPad, which accounts for about 90% of tablet sales. However, the PlayBook’s ability to share data with BlackBerry phones should give it an advantage. Research in Motion is a buy.
AGRIUM INC. $88 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $13.9 billion; Price-to-sales ratio: 1.4; Dividend yield: 0.1%; TSINetwork Rating: Average; www.agrium.com) earned $731.0 million, or $4.63 a share, in 2010 (all amounts except share price and market cap in U.S. dollars). That’s up 99.7% from $366.0 million, or $2.33 a share, in 2009. Sales rose 15.2%, to $10.5 billion from $9.1 billion. That’s largely because rising crop prices are prompting farmers to buy more fertilizer, seeds and agricultural supplies from Agrium. As well, the company recently completed its $1.2-billion (Australian) purchase of AWB Ltd., which operates over 400 farm-supply stores in Australia and New Zealand. Agrium also assumed $540 million (Australian) of AWB’s debt. That pushed up its total long-term debt to $2.1 billion at the end of 2010. However, that’s still less than two years’ cash flow. Agrium is a buy.
These three companies all have large overseas operations. That exposes them to a wide variety of risks, including volatile currency-exchange rates and political unrest. However, all three are focusing on fast-growing markets. That enhances their long-term prospects. THOMSON REUTERS CORP. $38 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 833.7 million; Market cap: $31.7 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.thomsonreuters.com) has two main divisions: Markets (which supplied 58% of its 2010 revenue and 49% of its earnings) sells financial-information products to banks and other financial institutions. Professional (42%, 51%) sells specialized information to professionals in the legal, accounting, scientific and health-care fields. Thomson Reuters took its present form when the Ontario-based Thomson Corp. bought the U.K.-based Reuters news agency for $17 billion U.S. in cash and shares (all amounts except share price and market cap in U.S. dollars) in April 2008....
CANADA BREAD CO. LTD. $47 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.5%; TSINetwork Rating: Above Average; www.canadabread.ca) earned $2.85 a share in 2010, down 10.9% from $3.20 in 2009. The latest earnings exclude the costs of a new bakery in Hamilton, Ontario, which should begin operating in July 2011. Savings from this new plant will help Canada Bread offset rising costs for wheat and other ingredients. Sales fell 6.9%, to $1.6 billion from $1.7 billion, as the high Canadian dollar hurt the contribution of its U.K. and U.S. operations. Canada Bread is still a hold.
SHAWCOR LTD. $37 (Toronto symbol SCL:A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.6 million; Market cap: $2.6 billion; Price-to-sales ratio: 2.6; Dividend yield: 0.8%; TSINetwork Rating: Average; www.shawcor.com) saw its revenue fall 12.7% in 2010, to $1.0 billion from $1.2 billion in 2009. That’s partly because it competed a major pipeline-coating job in late 2009. Earnings per share fell 19.9%, to $1.49 from $1.86. The company’s backlog of customer orders that it expects to complete within a year fell 8.7% in 2010, to $374.6 million. However, higher oil prices are spurring new pipeline construction. The company has submitted bids on various contracts worth a total of $1.5 billion. ShawCor is a buy.