price to sales ratio

SARA LEE CORP. $19 (New York symbol SLE; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 639.3 million; Market cap: $12.1 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.saralee.com) has gained 58.3% since we first recommended it in the December 2009 Wall Street Stock Forecaster. That’s because the company is focusing on its processed-food operations, and has sold most of its less-profitable household and body-care products businesses. As a smaller company, Sara Lee is reportedly attracting takeover offers. However, Sara Lee may instead spin off its meat and beverage businesses as separate companies. Break-ups like this help unlock hidden value, and generally lead to above-average results for a period of years. Sara Lee is still a buy.

YUM! BRANDS INC. $48 (New York symbol YUM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 468.6 million; Market cap: $22.5 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.yum.com) plans to sell its A&W (hamburgers) and Long John Silver’s (seafood) restaurant chains. Together, these businesses account for about 1% of Yum’s sales. Selling these operations would let Yum focus on its three remaining chains: KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). These brands are easier to expand internationally than A&W and Long John Silver’s, which mainly operate in the U.S. The company feels its international operations will supply 75% of its earnings in 2015, up from 65% in 2010. Yum Brands is a buy....

TERADATA CORP. $44 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 167.5 million; Market cap: $7.4 billion; Price-to-sales ratio: 4.1; No dividends paid; TSINetwork Rating: Average; www.teradata.com) is buying privately held Aprimo, which sells marketing analysis software and services to over 150,000 clients. These products help its clients make better marketing decisions. Teradata is paying $525 million for Aprimo. To put that in context, Teradata earned $75 million, or $0.44 a share, in the three months ended September 30, 2010. The deal should close in the first quarter of 2011. Aprimo uses a cloud-computing model to sell its software. (Cloud computing involves storing data and software on one or more centralized computer networks. Users access these programs or files over the Internet, or through some other computer network.) Aprimo’s expertise will help Teradata as more businesses turn to cloud computing as it cuts their costs....

KRAFT FOODS INC. $31 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.7 billion; Market cap: $52.7 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.kraft.com) is the world’s second-largest food company, after Switzerland-based Nestle. Kraft has 11 brands that each generate over $1 billion in yearly sales. These include Kraft (cheeses, pasta and salad dressings), Philadelphia (cream cheese), Maxwell House (coffee), Nabisco (biscuits), Oreo (cookies) and Oscar Meyer (meats). In April 2010, Kraft paid $18.5 billion in cash and stock for U.K.-based Cadbury plc, a leading maker of chocolate, candy and gum. These products are more profitable than Kraft’s foods, so adding Cadbury should increase Kraft’s long-term earnings....

CANADIAN IMPERIAL BANK OF COMMERCE $77 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 392.7 million; Market cap: $30.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 4.5%; TSINetwork Rating: Above Average; www.cibc.com) is Canada’s fifth-largest bank, with total assets of $352.0 billion. CIBC continues to expand its main retail-banking business, which is less volatile than its trading activities. Retail banking now accounts for 74% of CIBC’s business, up from 69% a year earlier. The bank aims to raise this to 75%. This focus on retail banking is paying off. In fiscal 2010, CIBC’s earnings jumped 125.6%, to $2.3 billion. It earned $1.0 billion in fiscal 2009. Earnings per share rose 121.5%, to $5.87 from $2.65, on more shares outstanding. If you exclude several one-time items, including writedowns of securities the bank holds, earnings per share would have risen 9.8%, to $6.37 from $5.80....

BANK OF MONTREAL $58 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 568.1 million; Market cap: $32.9 billion; Price-to-sales ratio: 2.1; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with assets of $411.6 billion. The bank earned $2.8 billion in its 2010 fiscal year. That’s up 57.2% from $1.8 billion in fiscal 2009. Earnings per share rose 54.2%, to $4.75 from $3.08, on more shares outstanding. Unusual items, such as severance costs and writedowns of securities the bank holds, depressed its fiscal 2009 earnings. If you exclude these items, earnings per share would have risen 19.9%. In fiscal 2010, loan-loss provisions fell 34.6%, to $1.05 billion from $1.6 billion. Revenue rose 10.4%, to $12.2 billion from $11.1 billion....

BANK OF NOVA SCOTIA $56 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $56.0 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.scotiabank.com) is Canada’s third-largest bank, with assets of $526.7 billion. The bank recently agreed to buy the 82% of DundeeWealth Inc. (Toronto symbol DW) that it does not already own. Dundee- Wealth manages investments and operates a brokerage. The company also owns the Dynamic family of mutual funds, and provides financialplanning and investment advice. The deal will double the size of Bank of Nova Scotia’s mutualfund business, and make it Canada’s fifth-largest mutual-fund company. Bank of Nova Scotia will pay $2.3 billion in cash and stock for the rest of DundeeWealth. If Dundee- Wealth shareholders approve, the sale should close in the first half of 2011. The new operations should add $0.12 a share to the bank’s annual earnings in the third year following the purchase....

TORONTO-DOMINION BANK $74 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 878.5 million; Market cap: $65.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.td.com) is Canada’s second-largest bank, with total assets of $619.5 billion. TD recently agreed to buy privately held Chrysler Financial, which provides car loans and leases to buyers of Chrysler vehicles in Canada and the U.S. The purchase will make TD one of the top five car-loan providers in North America. The bank will pay $6.3 billion U.S. for Chrysler Financial when the deal closes in April 2011. This purchase will let TD profit from rising new-car demand. It will also add $100 million to TD’s annual earnings, starting in fiscal 2012....

ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009. The fiscal 2010 earnings figure includes a $116-million loss on the sale of one of the bank’s main holdings, U.S.-based Liberty Life Insurance Co. Without unusual items, such as the loss on Liberty Life, Royal would have earned $5.3 billion, up 9.9% from $4.9 billion a year earlier....

CGI Group is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk. It’s true that each of these factors is something of a negative, but each is minor compared to CGI’s strong growth prospects. That’s why we picked CGI as our Stock of the Year in January 2010. The stock has gained 20.0% since then. We still feel CGI has years of growth ahead, particularly because its services help cash-strapped governments and businesses cut costs. It also trades at a low multiple to earnings. That’s why we are once again picking CGI as our Stock of the Year for 2011....