price to sales ratio
T. ROWE PRICE GROUP INC. $55 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 259.0 million; Market cap: $14.2 billion; Price-to-sales ratio: 7.7; Dividend yield: 2.0%; WSSF Rating: Average) sells mutual funds and wealth-management services. The company’s assets under management rose 41.6%, to $391.3 billion at the end of 2009 from $276.3 billion a year earlier. Rising stock markets were the main reason for the increase. As well, the improving economy spurred higher demand for mutual funds. Despite these gains, average assets under management still fell 10.3% in 2009. As a result, T. Rowe Price’s revenue fell 11.8% in 2009, to $1.9 billion from $2.1 billion in 2008. Earnings dropped 11.7%, to $433.6 million from $490.8 million. Earnings per share fell 8.8%, to $1.65 from $1.81, on fewer shares outstanding....
PETSMART INC. $32 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 123.6 million; Market cap: $4.0 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.3%; WSSF Rating: Above Average) is the biggest pet supply chain in the U.S. It operates 1,149 pet stores in the U.S. and Canada. It also has 162 in-store PetHotels, which look after pets while their owners are away from home. PetSmart focuses on selling premium pet foods and other products that most supermarkets don’t carry, including its own line of private-label products. It also plans to launch a new line of Martha Stewart pet-care products in the next few months. Exclusive items like these help the company compete with larger retailers — including Wal-Mart.
Long-term trends look positive
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AMERICAN EXPRESS CO. $41 (New York symbol AXP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $49.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.8%; WSSF Rating: Average) gets most of its revenue from the the fees it charges merchants when consumers use its credit and charge cards. It also provides travel-agency services. American Express set aside $5.3 billion to cover bad loans in 2009. That’s down 8.4% from $5.8 billion in 2008. However, the 2009 figure is still up more than 100% from four years ago. In 2009, the company’s earnings fell 25.6%, to $2.1 billion from $2.9 billion in 2008. The company sold $555.5 million of new common shares in 2009 to help repay the $3.4 billion in loans it received from the U.S. Treasury under the Troubled Asset Relief Program (TARP). Because of the extra shares outstanding, earnings per share fell 37.7%, to $1.54 from $2.47. Revenue fell 13.5%, to $24.5 billion from $28.4 billion....
STATE STREET CORP. $45 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 495.4 million; Market cap: $22.3 billion; Price-to-sales ratio: 2.7; Dividend yield: 0.1%; WSSF Rating: Extra Risk) makes most of its money providing accounting and record-keeping services to large institutional investors, such as mutual funds and pension plans. State Street has agreed to pay $313 million to settle lawsuits that accused the company of selling investors securities backed by subprime mortgages without warning of the risks involved. This latest payment is in addition to $350 million that State Street has already paid to settle earlier lawsuits. If you exclude these payments and other unusual items, State Street would have earned $2.0 billion in 2009. That’s down 14.9% from $2.4 billion in 2008. In May 2009, State Street issued $2 billion of common shares and used the proceeds to pay back its TARP loans. As a result of the extra shares, earnings per share fell 26.7%, to $4.11 from $5.61. Revenue fell 16.4%, to $8.8 billion from $10.5 billion....
WESTERN UNION CO. $17 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 682.8 million; Market cap: $11.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.4%; WSSF Rating: Above Average) provides money-transfer and foreign-exchange services in over 200 countries. The company recently completed a restructuring that included closing some outlets and outsourcing certain administrative functions. These moves should save it $40 million a year. If you exclude unusual costs, Western Union earned $902.7 million in 2009. That’s down 7.0% from $970.6 million in 2008. The company spent $400 million on share buybacks during the year. Since it had fewer shares outstanding, its earnings per share fell just 1.5%, to $1.29 from $1.31....
BROADRIDGE FINANCIAL SOLUTIONS INC. $22 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 134.8 million; Market cap: $3.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.6%; WSSF Rating: Average) serves the investment industry in three main areas: investor communications; securities processing; and transaction clearing. The company mails and processes 70% of all proxy votes. Broadridge stands to gain as more investors buy shares during the stock-market rebound. It should also benefit as securities regulations become more complex. As well, lower prices for computer hardware and software are driving down its operating costs. In its second quarter, which ended December 31, 2009, Broadridge’s earnings before one-time items jumped 76.2%, to $0.37 a share from $0.21 a year earlier. Revenue rose 21.1%, to $529.7 million from $437.5 million....
The retailing industry is fiercely competitive. But leading retailers like Wal-Mart and PetSmart have special advantages that give them an edge. For example, Wal-Mart’s huge size lets it extract low prices from suppliers all over the world. PetSmart is much smaller that Wal-Mart, so it doesn’t have the same sway over its suppliers. However, PetSmart’s focus on high-quality products and specialized services continue to help it dominate its niche industry....
BECKMAN COULTER INC. $64 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 69.9 million; Market cap: $4.5 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.1%; WSSF Rating: Average) makes lab equipment that doctors and medical researchers use to detect substances in bodily fluids. Under Obamacare, Beckman and other medical-device makers will have to pay new fees, which they will attempt to pass on to their customers. Of course, expanded health care should lead to greater demand for Beckman’s tests. Right now, however, the market is focusing on more immediate matters. The stock fell 7% in mid-March due to problems with a test kit that determines whether a patient has suffered a heart attack....
Non-bank financial companies, such as mutual-fund and insurance firms, are good ways to diversify your Finance-sector holdings. The six we analyze below are leaders in their niche markets. That cuts their risk. As well, their well-known brands will help them grow as the global economy continues to recover. We have a high opinion of all six companies, but only two are buys right now. AMERICAN EXPRESS CO. $41 (New York symbol AXP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $49.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.8%; WSSF Rating: Average) gets most of its revenue from the the fees it charges merchants when consumers use its credit and charge cards. It also provides travel-agency services. American Express set aside $5.3 billion to cover bad loans in 2009. That’s down 8.4% from $5.8 billion in 2008. However, the 2009 figure is still up more than 100% from four years ago....
PEPSICO INC. $66 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $105.6 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.7%; WSSF Rating: Above Average) is developing a new type of salt that contains less sodium than regular salt. That will help it achieve its goal of cutting the sodium in its potato chips by 25% over the next five years. PepsiCo also aims to use less sugar in its soft drinks. Healthier products should help PepsiCo offset slowing sales in North America, particularly as baby boomers consume fewer soft drinks and snack foods as they grow older. PepsiCo is a buy.