price to sales ratio

PENGROWTH ENERGY TRUST $11 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 291.3 million; Market cap: $3.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 7.6%; SI Rating: Average) is one of North America’s largest energy royalty trusts. Its main properties are in Alberta, B.C. and Saskatchewan. The trust also holds interests in other energy projects, such as its 8.4% stake in the Sable Offshore Energy Project, which operates three offshore-drilling platforms south of Nova Scotia. Roughly 60% of Pengrowth’s production is natural gas. The remaining 40% is oil. Investors see this a negative in light of today’s low gas prices. However, a colder-than-normal winter could cause gas prices to shoot up again. Pengrowth’s focus on proven properties with large reserves and predictable production rates also tempers its risk.

New properties spurred revenue jump

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Beckman Coulter has suffered lately, mostly because of problems with a test kit that determines whether a patient has suffered a heart attack. Beckman recalled the test kit, which accounted for about 2% of its 2009 sales, earlier this year. The company is now working with the U.S. Food and Drug Administration to fix the problem. Beckman plans to begin clinical trials of the upgraded test kit next year. The company also faces other challenges. A number of smaller pharmaceutical firms have been taken over by larger companies. That gives Beckman fewer potential customers. As well, the company’s chief executive officer recently resigned. That adds further uncertainty. We feel Beckman’s aggressive response to its quality problems will limit any long-term damage to its reputation. As well, despite the bad news, the company sold more lab equipment in the U.S. in its latest quarter, and is seeing strong growth overseas. Each new sale gives Beckman a new customer for its supplies and maintenance services. Sales of supplies now account for over 80% of the company’s revenue. That helps cut its risk....

BAXTER INTERNATIONAL INC. $48 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 584.4 million; Market cap: $28.1 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.4%; WSSF Rating: Average) gets over half of its revenue from medical products that can only be used once. Like Beckman, this gives it steady revenue streams. As well, Baxter’s wide range of products limits its reliance on a single product or region. It has three divisions: BioScience (about 44% of 2009 sales), makes vaccines and drugs; Medical Delivery (37%) makes intravenous equipment; and Renal (18%) makes dialysis equipment. These strengths will help Baxter overcome several challenges. For example, the weak economy is prompting hospitals to switch to cheaper alternatives to Baxter’s products. The company has cut its prices in response. As well, Baxter is recalling its Colleague infusion pumps because of a defect that could cause patients to receive too much medication. It will replace these pumps with newer models, or offer refunds....

High unemployment continues to hold back consumer spending in the U.S. As well, many households are using their extra cash to pay down debt. Even so, demand for electronic devices, particularly smartphones and video-game players, continues to rise. That’s good news for these four leading makers of consumer-electronic products. All four have launched new devices in time for Christmas. Their new products are also helping them increase sales in emerging markets. Still, we see only three as buys right now. APPLE INC. $288 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 913.6 million; Market cap: $263.1 billion; Price-to-sales ratio: 4.6; No dividend paid; WSSF Rating: Average) makes computers and a variety of other electronic devices....

3M COMPANY $87 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 713.1 million; Market cap: $62.0 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.4%; WSSF Rating: Above Average) is taking advantage of the slow economy to buy other, related firms. So far in 2010, it has made eight purchases. The company usually buys smaller companies that it can easily absorb. 3M’s latest purchase is privately held Arizant Inc. This Minnesota-based company makes specialized electric blankets that help prevent infections in hypothermia patients. Arizant’s blankets look like a nice fit with 3M’s other hospital-related products. The $810-million price is equal to 72% of the $1.1 billion, or $1.54 a share, that 3M earned in the second quarter of 2010....

TEXAS INSTRUMENTS INC. $25 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $30.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.1%; WSSF Rating: Average) plans to buy back $7.5 billion of its shares. That’s in addition to the $1.3 billion still outstanding under its current buyback plan. There’s no time limit to these repurchases. The company also raised its quarterly dividend by 8.3%, to $0.13 a share from $0.12. The new annual rate of $0.52 yields 2.1%. Texas Instruments is a buy.

NVIDIA CORP. $11 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 574.0 million; Market cap: $6.3 billion; Price-to-sales ratio: 1.7; No dividends paid; WSSF Rating: Average) should also benefit from rising demand for consumer electronics. That’s because it is a leading designer of 3D-capable video chips for computers and other devices. These chips make video games run more smoothly, and appear more life-like. Nvidia outsources most of its production to chipmakers in Asia. Computer sales have been strong in the past few months, but more consumers are opting for machines with cheaper, integrated video chips instead of Nvidia’s video cards. Weaker demand in Europe and China is also weighing on Nvidia’s sales. As well, Apple is using video chips made by rival Advanced Micro Devices Inc. in its new Mac desktop computers. In its second quarter, which ended August 1, 2010, Nvidia lost $141.0 million, or $0.25 a share. One-time items, including warranty payments related to defective chips, were the main reason for the loss. Excluding all unusual items, Nvidia would have earned $20.1 million in the latest quarter, up 88.4% from $10.7 million a year earlier. On that basis, earnings per share rose 50.0%, to $0.03 from $0.02, on more shares outstanding. Sales rose 4.5%, to $811.2 million from $776.5 million....

Rising incomes in developing countries are fuelling demand for high-quality alcoholic beverages. That’s good news for Diageo and Molson Coors. Both companies are using their well-known brands to increase their sales outside North America and Europe. DIAGEO PLC ADRs $69 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 626.4 million; Market cap: $43.2 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.4%; WSSF Rating: Above Average) is the world’s largest premium alcoholic beverage company. Its top brands include Guinness stout, Smirnoff vodka, Johnnie Walker scotch whisky and Captain Morgan rum. In its latest fiscal year, which ended June 30, 2010, Diageo’s sales rose 5.0%, to 9.8 billion pounds from 9.3 billion pounds in the prior year (1 British pound = $1.61 Canadian). Overall sales volumes rose 2%. Volumes fell 2% in North America, but that was more than offset by a 1% gain in Europe, a 2% rise in the Asia-Pacific region and an 8% jump in other markets....

ABB LTD. ADRs $21 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $48.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 2.3%; WSSF Rating: Above Average) earned $623 million in the three months ended June 30, 2010, down 7.7% from $675 million a year earlier. Earnings per ADR fell 10.0%, to $0.27 from $0.30, on more shares outstanding. (Each American Depositary Receipt represents one ABB common share.) Restructuring costs and investment losses were the main reasons for the drop. Orders for new equipment rose 4.9%, to $7.7 billion from $7.3 billion, as strong sales of automated factory machinery offset slower demand for power-transmission equipment. ABB is a buy.

SARA LEE CORP. $14 (New York symbol SLE; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 662.2 million; Market cap: $9.3 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.1%; WSSF Rating: Above Average) should complete the sales of its remaining personal-care and household-product businesses by the end of 2010. Selling these operations will let Sara Lee focus on its more profitable food businesses, including making coffee, frozen bakery products and processed meats. Sara Lee will use the cash from these sales to buy back $2.5 billion to $3.0 billion of its shares over the next three years. The company’s plan to improve its productivity should also cut its annual costs by $350 million to $400 million by June 2012. Excluding unusual items, Sara Lee earned $746 million, or $1.08 a share, in the year ended July 3, 2010. Sara Lee is a buy....