price to sales ratio
APACHE CORP. $95 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 364.3 million; Market cap: $34.6 billion; Price-to-sales ratio: 3.1; Dividend yield: 0.6%; WSSF Rating: Average) still plans to go ahead with its purchase of Mariner Energy Inc. (New York symbol ME), despite an explosion at one of Mariner’s offshore oil rigs in the Gulf of Mexico. The company is paying $2.7 billion in cash and stock for Mariner. Unlike the sinking of BP’s Deepwater Horizon rig last April, this explosion did not result in a major oil spill. Moreover, the damage will have little impact on Mariner’s production. Apache is a buy.
DEL MONTE FOODS CO. $13 (New York symbol DLM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 193.7 million; Market cap: $2.5 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.8%; WSSF Rating: Average) makes canned fruits, vegetables, sauces and soups. Its leading brands include Del Monte, Contadina, S&W and College Inn. In 2006, the company bought the Meow Mix line of cat foods and the Milk-Bone dog-biscuit business. These operations complemented its existing pet-food brands, including 9Lives and Kibbles ’n Bits. As well, Del Monte earns higher profits on pet foods than consumer foods like fruits and vegetables. The pet-food division supplied 47% of the company’s sales in the latest fiscal year, and 61% of its earnings....
LINAMAR CORP. $20 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.6%; SI Rating: Extra Risk) gets about 90% of its revenue by selling transmissions and other parts to several carmakers. The company also makes self-propelled, scissor-type elevating work platforms under the Skyjack name, plus consumer products, such as lawn mowers and cargo trailers. Linamar continues to benefit from rising car sales in the wake of the recession. It cut 40% of its workforce during the downturn, but has rehired many workers as car sales recovered. Still, the company expects its cost-cutting plan to lower its annual expenses by $60 million, starting this year. In the three months ended June 30, 2010, Linamar earned $26.6 million, or $0.41 a share. That’s a big improvement over its year-earlier loss of $10.1 million, or $0.16 a share. The year-earlier results excluded severance payments and write-downs of plants and equipment....
SHAWCOR LTD. $27 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.6 million; Market cap: $1.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.1%; SI Rating: Average) gets 90% of its revenue by making sealants and coatings that protect oil and natural-gas pipelines from corrosion. The remaining 10% comes from making electrical wire and protective sheaths. In the three months ended June 30, 2010, ShawCor’s revenue fell 25.0%, to $234.5 million from $312.8 million a year earlier. That’s mainly because of a drop in new pipeline construction in North America. ShawCor also completed a major contract in the Caribbean in late 2009. As well, Canada accounts for just 25% of ShawCor’s revenue, so the higher Canadian dollar hurts the contribution of its overseas operations. The lower revenue was the main reason why ShawCor’s earnings fell 68.6% in the quarter, to $10.9 million, or $0.15 a share. It earned $34.6 million, or $0.49 a share, a year earlier....
FINNING INTERNATIONAL INC. $22 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.0 million; Market cap: $3.8 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.2%; SI Rating: Above Average) sells, rents and repairs heavy equipment, such as tractors, bulldozers and trucks, made by Caterpillar Inc. Finning’s major customers are in the mining, forest-products and construction industries in western Canada, the U.K. and South America. In the three months ended June 30, 2010, Finning earned $36.0 million, or $0.21 a share. That’s down 36.3%, from $56.5 million, or $0.33 a share, a year earlier. However, the latest quarterly earnings included a $0.06-a-share charge for costs to install a new computer system and buy back notes. Without these charges, Finning would have earned $0.27 a share in the latest quarter. Revenue fell 2.0%, to $1.07 billion from $1.1 billion. Lower sales of new and used equipment offset a 10% rise in sales of support services. Finning now gets nearly half of its revenue from services. That cuts its risk....
CENOVUS ENERGY INC. $29 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.8 million; Market cap: $21.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 2.8%; SI Rating: Extra Risk) operates three oil-sands properties in Alberta, and one in Saskatchewan. Cenovus ships the heavy bitumen from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of Cenovus’ two main oil-sands projects. Cenovus also owns conventional oil and natural-gas properties. Cenovus’ proved oil and gas reserves will last 14.7 years. These large reserves mean that Cenovus does not need to spend heavily on exploration. That cuts its risk. Moreover, its steam-assisted gravity draining drilling technology should spur its long-term earnings. That’s because this process makes it easier to extract more heavy oil.
Focus on proven properties cuts risk
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ENCANA CORP. $30 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.2 million; Market cap: $22.1 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.8%; SI Rating: Average) is one of North America’s largest natural-gas producers. The company prefers to focus on large unconventional reserves, including shale gas, which is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas. At current production rates, Encana’s proved reserves should last 12 years. However, these properties could last 50 years if you include harder-to-reach reserves. Despite weak gas prices, Encana plans to double its gas production over the next five years. That would help raise its market share, because low gas prices have prompted many of its competitors to cut production....
It’s been nearly a year since the old EnCana Corp. split itself into two separate companies: one that focuses on unconventional natural gas (Encana), and one that specializes in oil-sands projects (Cenvous Energy). Shareholders received one share in each of the two new firms for every old EnCana share they held. The new Encana has suffered, mostly because of a recent drop in natural gas prices. As well, Cenovus has faced pressure from environmentalists who are opposed to oil-sands development. But the breakup helped unlock hidden value. As a result, both stocks should produce above-average results in the next few years. ENCANA CORP. $30 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.2 million; Market cap: $22.1 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.8%; SI Rating: Average) is one of North America’s largest natural-gas producers....
POTASH CORP. OF SASKATCHEWAN INC. $156 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 296.6 million; Market cap: $46.3 billion; Price-to-sales ratio: 8.1; Dividend yield: 0.3%; SI Rating: Average) is the target of a $130.00 U.S.-a-share hostile takeover offer from BHP Billiton Ltd. (New York symbol BHP). We first added Potash Corp. to our Aggressive Growth Portfolio in our June 2009 issue as a hold. At that time, it was trading at $121. By October 2009, the stock had dropped to $106, and we changed our recommendation to buy. Based on today’s exchange rate, Potash Corp. shares trade at 15.7% more than BHP’s offer. That suggests investors expect a higher bid. Even if no new bid emerges, BHP’s offer represents a 27.2% gain over our first buy recommendation....
TECK RESOURCES LTD. $39 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 589.5 million; Market cap: $23.0 billion; Price-to-sales ratio: 2.4; Dividend yield: 1.0%; SI Rating: Average) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Coal accounted for 46% of Teck’s 2009 revenue, and 54% of its earnings. Teck also produces copper (28%, 31%) and zinc (26%, 15%). Thanks to higher coal and copper prices, Teck’s earnings rose 110.1% in the three months ended June 30, 2010, to $376 million from $179 million a year earlier. In July 2009, Teck sold $1.7 billion of class-B subordinate-voting shares to a Chinese sovereign wealth fund, and used the proceeds to pay down debt. Because of the extra shares outstanding, earnings per share rose 74.2% in the latest quarter, to $0.64 from $0.37....