price to sales ratio

RIOCAN REAL ESTATE INVESTMENT TRUST $20 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 243.2 million; Market cap: $4.9 billion; Price-to-sales ratio: 6.2; Dividend yield: 6.9%; SI Rating: Average) is Canada’s largest real estate investment trust (REIT). RioCan has properties in all 10 provinces. The trust specializes in large outdoor malls, and owns 261 retail properties, 12 of which are under development. Most are in suburban areas, where land is generally cheaper than in towns and cities. Since it became a REIT in the early 1990s, RioCan has focused on developing and leasing retail space in Canada. However, it recently expanded to the U.S. through a new joint venture with Cedar Shopping Centers, Inc. (New York symbol CDR). RioCan paid $181 million U.S. for 80% of this joint venture, which will own seven shopping centres in the northeastern U.S. RioCan also received 14.3% of Cedar as part of the deal.

More U.S. purchases seem likely

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We display a price-to-sales or p/s ratio with every stock we cover in our newsletters, including our flagship publication, The Successful Investor. Price-to-sales is the ratio you get when you compare a stock’s price to its sales per share (you get sales per share by dividing total annual sales by the number of outstanding shares).

Treat financial ratios like price-to-sales as one tool among many

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Demand for wireless services continues to rise strongly. New phones and devices, such as Apple’s iPad and Amazon’s Kindle e-book reader, should continue to spur demand for wireless service. We still have a high opinion of Apple and Amazon. But their high share prices make them vulnerable to sudden setbacks. We think network operators like AT&T and Verizon provide a conservative way to profit from the popularity of wireless devices. That’s because they have wider and steadier revenue sources than device makers. AT&T INC. $26 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 5.9 billion; Market cap: $153.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 6.5%; WSSF Rating: Average) gets 50% of its revenue by selling traditional telephone services to 45 million customers in 22 states. The company’s wireless division has 87 million customers nationwide, and accounts for 45% of AT&T’s revenue. The remaining 5% comes from selling ads in telephone directories....

The Securities and Exchange Commission (SEC) has accused broker Goldman Sachs of misleading investors about the risks of investing in certain mortgage-backed securities. Fears that the SEC will launch similar lawsuits have hurt the stock prices of most major U.S. banks. As well, Congress may pass new laws aimed at preventing another financial crisis. These reforms could force banks to raise more capital to cover bad loans, or sell some of their businesses. Despite the uncertainty, we still like the long-term prospects of these two high-quality banks:...

Computer-chip technology changes rapidly. New advances keep driving down chip prices and profit margins. To lower your risk, we look for companies that have the financial strength to keep developing new products. Here are four high-quality chip-related stocks that we see as buys. All four are in a strong position to gain from rising consumer and business spending on new computers and other devices. INTEL CORP. $23 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.5 billion; Market cap: $126.5 billion; Price-to-sales ratio: 3.1; Dividend yield: 2.7%; WSSF Rating: Above Average) is the world’s largest computer chip maker. It controls about 80% of the market....

MICROSOFT CORP. $31 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.8 billion; Market cap: $272.8 billion; Price-to-sales ratio: 4.7; Dividend yield: 1.7%; WSSF Rating: Above Average) has risen 16% since it released its Windows 7 operating system on October 22, 2009. About 10% of the world’s computers now use Windows 7. Strong demand for this new program is the main reason why Microsoft’s earnings jumped 34.6% in its third quarter, to $4.0 billion from $3.0 billion a year earlier. (Microsoft’s third quarter ended March 31, 2010.) Earnings per share rose 36.4%, to $0.45 from $0.33, on fewer shares outstanding. Revenue rose 6.3%, to a record $14.5 billion from $13.7 billion. Microsoft spent 15.2% of its revenue on research in the latest quarter. Microsoft is a buy.

CANON INC. ADRs $46 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.2 billion; Market cap: $55.2 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.5%; WSSF Rating: Above Average) earned $610.9 million, or $0.49 per ADR, in the three months ended March 31, 2010 (each American Depositary Receipt represents one common share). That’s up 237.4% from $181.1 million, or $0.15 per ADR, a year earlier. Sales rose 15.9%, to $8.1 billion from $7.0 billion. Strong digital-camera sales were the main reason for the gain. As well, the weaker Japanese yen makes Canon’s products more affordable in North America and other major markets. Demand for Canon’s copiers and printers should also rise as the global economy recovers. Canon is a buy.

Food sellers Sysco and Supervalu stand to gain from increasing restaurant traffic and grocery store sales as the economy recovers. However, they could have trouble passing along higher food and other costs to their customers. We feel both stocks will likely make little progress in the next few months. SYSCO CORP. $31 (New York symbol SYY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 592.6 million; Market cap: $18.4 billion; Price-to-sales ratio: 0.5; Dividend yield: 3.2%; WSSF Rating: Average) supplies food and kitchen supplies to over 400,000 restaurants, hotels and schools in North America and Ireland. Restaurants account for over 60% of Sysco’s sales, and more people are eating at home because of the weak economy. As a result, the company’s second-quarter sales fell 3.1%, to $8.9 billion from $9.1 billion a year earlier (Sysco’s second quarter ended December 26, 2009). Lower food costs also held back Sysco’s sales....

TUPPERWARE BRANDS CORP. $52 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 63.1 million; Market cap: $3.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.9%; WSSF Rating: Above Average) continues to see strong demand for its plastic food containers and beauty products in Brazil, China, India and other emerging markets. These markets now account for more than half of Tupperware’s sales. In the three months ended March 27, 2010, earnings per share jumped 68.9%, to $0.76 from $0.45 a year earlier. Sales rose 20.4%, to $557.1 million from $462.8 million. Tupperware Brands is a buy.

SNAP-ON INC. $48 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 57.8 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.5%; WSSF Rating: Average) earned $36.8 million in the three months ended April 3, 2010. That’s up 5.7% from $34.8 million a year earlier. Earnings per share rose 5.0%, to $0.63 from $0.60, on more shares outstanding. Revenue rose 8.6%, to $621.6 million from $572.6 million. The slow economy has prompted more consumers to hold on to their older cars instead of buying new ones. As a result, auto mechanics are ordering more tools and diagnostic equipment from Snap-On. The company is also benefiting from a recent cost-cutting plan. However, Snap-On’s European sales remain weak, and its financing division continues to lose money....