price to sales ratio
METRO INC. $43 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 105.8 million; Market cap: $4.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.8%; TSINetwork Rating: Average; www.metro.ca) has about 600 supermarkets and 250 drugstores in Ontario and Quebec. In the three months ended December 18, 2010, Metro’s sales fell 0.5%, to $2.63 billion from $2.65 billion a year earlier. Metro cut its prices due to rising competition from other grocery retailers and Wal-Mart, which continues to expand its grocery offerings. As well, drug prices have fallen due to the expiry of important drug patents and new generic-drug legislation in Ontario. However, earnings rose 3.7%, to $92.0 million from $88.7 million. Earnings per share rose 7.3%, to $0.88 from $0.82, on fewer shares outstanding. These figures exclude one-time items, such as expansion costs and a lower tax bill....
TRANSCANADA CORP. $38 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 690.0 million; Market cap: $26.2 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.transcanada.com) has received enough commitments from oil shippers to build a new pipeline from Montana and North Dakota to oil-storage facilities in Cushing, Oklahoma. This pipeline will cost $140 million. TransCanada also plans to build a $70-million pipeline from Cushing to refineries on the U.S. Gulf Coast. To put these costs in context, TransCanada earned $374 million, or $0.54 a share, in the three months ended September 30, 2010. If these projects receive regulatory approval, they should begin operating in 2013. These new pipelines will complement TransCanada’s $12-billion U.S. Keystone pipeline project, which recently started pumping oil from Alberta to refineries in the U.S. Midwest....
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) is best known for its BlackBerry smartphones and other wireless devices. There are now over 55 million BlackBerry users in 175 countries. RIM gets 80% of its revenue by selling hardware; services and software supply the remaining 20%.
Advantages outweigh RIM’s risks
RIM is riskier than most of our recommendations. That’s mainly because smartphone technology changes quickly, and the industry is intensely competitive. However, the company has several advantages that help offset these risks....
We’ve chosen Tupperware as our Stock of the Year for 2011. We first recommended it in the May 2007 issue of Wall Street Stock Forecaster at $26. We felt its direct sales force was an overlooked asset. This independent dealer network keeps the company’s marketing costs low, and is a great way to enter developing markets with few retail stores. Tupperware could also use its network in the future to sell other products besides food containers and cosmetics. The stock has gained 80.8% since we first made it a buy. Even so, we feel it has lots more growth ahead. As well, Tupperware trades at less than 12 times its expected 2011 earnings. That’s a low p/e ratio in light of the company’s well-known brands and continued strong growth potential in emerging markets. TUPPERWARE BRANDS CORP. $47 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 63.2 million; Market cap: $3.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) makes high-quality products for the home, including plastic food and beverage containers and children’s educational toys. These products account for 70% of its revenue. The remaining 30% comes from its beauty products division, which makes a wide range of cosmetics, bath oils and fragrances....
These three chipmakers are leaders in the their niche markets. But they need new products to keep growing. That’s why all three are spending heavily to develop new chips for smartphones and other popular mobile devices. INTEL CORP. $22 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.6 billion; Market cap: $123.2 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.intel.com) is the world’s leading computer-chip maker. For 2010, the company reported record revenue of $43.6 billion. That’s up 24.2% from $35.1 billion in 2009. Earnings jumped 76.1%, to a record $11.6 billion from $6.6 billion in 2009. During the year, Intel paid $1.5 billion to buy back 70 million of its shares. Because of fewer shares outstanding, earnings per share rose 75.2%, to $2.05 from $1.17....
J.P. MORGAN CHASE & CO. $45 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.9 billion; Market cap: $175.5 billion; Price-to-sales ratio: 1.7; Dividend yield: 0.4%; TSINetwork Rating: Average; www.jpmorganchase.com) earned $15.8 billion in 2010. That’s up 79.7% from $8.8 billion in 2009. Earnings per share rose 75.3%, to $3.98 from $2.27, on more shares outstanding. That’s mainly because loan-loss provisions fell 48.0%, to $16.6 billion from $32.0 billion, as the economy recovers. However, revenue rose just 2.3%, to $102.7 billion from $100.4 billion, due to declines at its credit-card and retail banking operations. Morgan is also spending more to comply with new U.S. banking laws. The higher costs and uncertainty over the new laws will keep Morgan from raising its $0.20-a-share dividend. J.P. Morgan Chase is still a hold.
INTERNATIONAL BUSINESS MACHINES CORP. $161 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $193.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.ibm.com) is the world’s biggest computer company. In the past few years, IBM has shifted its focus from making computers to designing computer systems and managing them on behalf of clients. The company now gets 55% of its revenue and 40% of its earnings from computer services. IBM earned $14.8 billion in 2010. That’s up 10.5% from $13.4 billion in 2009. The company spent $15.4 billion on share buybacks in 2010. Because of fewer shares outstanding, earnings per share rose 15.1%, to $11.52 from $10.01. Revenue rose 4.3% in 2010, to $99.9 billion from $95.8 billion in 2009. The company signed $22.1 billion of new service contracts in the fourth quarter of 2010. That’s up 18% from a year earlier. On December 31, 2010, IBM’s order backlog was $142 billion, or 1.4 times its annual revenue....
Businesses and consumers are shipping more packages as the economy improves. That’s helping FedEx and Arkansas Best. However, we prefer FedEx because of its larger international focus. It also uses fewer unionized workers. FEDEX CORP. $94 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 315.0 million; Market cap: $29.6 billion; Price-to-sales ratio: 0.8: Dividend yield: 0.5%; TSINetwork Rating: Average; www.fedex.com) delivers packages and documents in the U.S. and over 220 countries. Its fleet of 80,000 trucks and 684 aircraft delivers over 8 million packages a day. In FedEx’s 2011 second quarter, which ended November 30, 2010, the company earned $283 million, or $0.89 a share. That’s down 18.0% from $345 million, or $1.10 a share, a year earlier. However, if you exclude one-time charges, earnings per share would have risen 5.5% in the latest quarter, to $1.16. Revenue rose 12.1%, to $9.6 billion from $8.6 billion....
GENERAL ELECTRIC CO. $20 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.7 billion; Market cap: $214.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.ge.com) is seeing rising demand for its large industrial equipment, such as turbines and locomotives, as the economy recovers. GE’s order backlog is now a record $175 billion. In 2010, GE’s earnings rose 15.4%, to $12.6 billion, or $1.15 a share. It earned $10.9 billion, or $1.00 a share, in 2009. Revenue fell 3.3%, to $150.2 billion from $155.3 billion. However, that’s partly because the company continues to shrink GE Capital, its finance division. GE is a buy.
Ameren and Alliant are Midwestern utilities with long histories of steady dividend payments. We like both, but we prefer Alliant for new buying. That’s because it gets just 5% of its revenue from its unregulated businesses, compared to 25% for Ameren. This makes Alliant less vulnerable to unpredictable weather and volatile fuel prices. AMEREN CORP. $29 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 239.7 million; Market cap: $7.0 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.3%; TSINetwork Rating: Average; www.ameren.com) sells electricity and natural gas to 3.4 million customers in Illinois and Missouri. In the three months ended September 30, 2010, Ameren’s earnings rose 30.6%, to $333 million from $255 million a year earlier. Earnings per share rose 20.7%, to $1.40 from $1.16, on more shares outstanding....