price to sales ratio

THE STANLEY WORKS $52 (New York symbol SWK, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 80.4 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.5%; WSSF Rating: Average) makes a wide variety of hand and power tools for consumer and industrial users. Top brands include Stanley, FatMax and Powerlock. Stanley has agreed to buy rival toolmaker Black & Decker Corp. (New York symbol BDK) for $4.5 billion in stock. Assuming both companies’ shareholders approve, the deal should close in the first half of 2010. Stanley shareholders will own 50.5% of the combined company (to be called Stanley Black & Decker). Black & Decker investors will own the remaining 49.5%. This looks like a good move for Stanley. Black & Decker specializes in power tools, so there’s little overlap with Stanley’s hand tools. Moreover, Black & Decker’s security products, which include door locks and keyless-entry systems, are a nice fit with Stanley’s building-security business....

SNAP-ON INC. $40 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 57.7 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.0%; WSSF Rating: Average) makes hand and power tools for auto mechanics. It sells these through franchised vans that visit garages. This lets it build closer relationships with customers, which gives it an advantage over competitors. It also keeps Snap-On’s distribution costs down. Many U.S. carmakers have closed dealerships in response to weak sales. This has cut the number of repair shops that Snap-On can supply. Snap-On’s earnings fell 53.5% in the three months ended October 3, 2009, to $25.4 million, or $0.44 a share. A year earlier, it earned $54.6 million, or $0.94 a share....

BRIGGS & STRATTON CORP. $19 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 50.0 million; Market cap: $950.0 million; Price-to-sales ratio: 0.5; Dividend yield: 2.3%; WSSF Rating: Above Average) gets 60% of its revenue from making lawn-mower engines. (The company is the world’s largest lawn-mower engine maker.) The remaining 40% comes from other home and garden equipment, such as pressure washers and snow blowers. Because of the weak economy and high unemployment, consumers are spending less on discretionary items, including lawn equipment. As well, major home-improvement retailers are ordering fewer of Briggs’s products. Moreover, 2009 saw fewer hurricanes than previous years. That lowered demand for portable generators. In its first quarter, which ended September 27, 2009, Briggs’s revenue fell 29.2%, to $324.6 million from $458.2 million a year earlier. Losses ballooned to $8.7 million, or $0.18 a share, from $2 million, or $0.04 a share. The lower sales and a higher income-tax rate were the main reasons behind the higher losses. Briggs typically loses money during its first quarter. That’s because demand for lawn mowers is weak during the fall....

ALLIANT ENERGY CORP. $31 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 110.6 million; Market cap: $3.4 billion; Price-to-sales ratio: 1.0; Dividend yield: 4.8%; WSSF Rating: Average) sells electricity and natural gas to 1.4 million customers in Wisconsin, Iowa, Minnesota and Illinois. In the three months ended September 30, 2009, Alliant lost $43.3 million, or $0.39 a share. However, if you exclude a one-time charge related to the early repayment of debt, it would have earned $0.77 a share. In the year-earlier quarter, Alliant earned $109.1 million, or $0.99 a share. Revenue fell 9.7%, to $885.7 million from $980.3 million. The lower earnings and revenue were mainly caused by cooler-than-usual summer weather, which prompted consumers to use less power for air conditioning. Alliant wants to raise its rates by 17%. That would add $171 million to its annual revenue. Regulators recently let it increase rates by 8%. They will decide on the remainder in early 2010....

AMEREN CORP. $28 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 236.9 million; Market cap: $6.6 billion; Price-to-sales ratio: 0.8; Dividend yield: 5.5%; WSSF Rating: Average) sells electricity and natural gas to 3.4 million customers in Illinois and Missouri. In the third quarter of 2009, Ameren’s earnings rose 3.7%, to $255 million from $246 million a year earlier. However, earnings per share fell 0.9%, to $1.16 from $1.17, on more shares outstanding. These figures exclude several non-recurring charges, including the costs to close two generating units at one of its power plants. Revenue fell 11.9%, to $1.8 billion from $2.0 billion. Electricity sales to consumers fell 10%, as cool summer weather cut air-conditioner use. Sales to industrial customers fell 3%. Ameren is seeking approval to raise its power and gas rates. This would add $621 million to its annual revenue. Regulators will likely grant Ameren’s requests, because it needs the funds to cover higher operating and interest costs....

Diebold began making locks, safes and vaults for banks in 1876. NCR started making mechanical cash registers in 1879. In the years since, both companies have evolved into the world’s top suppliers of automated teller machines (ATMs). Diebold continues to focus on the banking industry, mostly with specialized services. In contrast, NCR has cut its exposure to banks with a variety of products that help retailers cut their labour costs. Despite their different strategies, we like the outlook for both companies, and see them as buys for long-term gains....

Small caps are companies with a “market cap”(the value of shares they have outstanding) below $2 billion, or some other arbitrary figure. Small-cap stocks are generally more volatile than large-cap stocks. Temporary setbacks, such as a poor quarterly earnings report or the loss of a contract, can quickly cut their share prices. To cut your risk, you should focus on small caps that are market leaders, such as these four industrial companies. They’re also attractive in relation to earnings, and provide above-average dividend yields. GENUINE PARTS CO. $38 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.6 million; Market cap: $6.1 billion; Price-to-sales ratio: 0.6; Dividend yield: 4.2%; WSSF Rating: Average) distributes automotive replacement parts to over 4,800 independent stores in North America. It also owns and operates over 1,100 auto-parts stores under the NAPA banner....

PROCTER & GAMBLE CO. $62 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.9 billion; Market cap: $179.8 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.8%; WSSF Rating: Above Average) is buying the Ambi Pur air freshener business from SARA LEE INC. $12 (New York symbol SLE; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 697.3 million; Market cap: $8.4 billion; Price-to-sales ratio: 0.7; Dividend yield: 3.7%; WSSF Rating: Above Average). Procter will pay $470 million when the deal closes in the first half of 2010. Europe accounts for most of Ambi Pur’s sales, so buying it complements Procter’s Febreeze air fresheners, which it mainly sells in North America. Sara Lee will use the cash to buy back shares and invest in its main food businesses. Both Procter & Gamble and Sara Lee are buys.

YUM! BRANDS INC. $35 (Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 467.7 million; Market cap: $16.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.4%; WSSF Rating: Average) announced that its 2009 earnings per share should rise by 12%. That’s because strong growth at its fast-food outlets in China and other countries is offsetting slow sales in the U.S. Lower food costs and income taxes are also contributing to the higher earnings. The company should earn $2.20 a share in 2009. The stock trades at 15.9 times that estimate. Yum feels its earnings will rise 10% in 2010, to $2.42 a share. That gives it a p/e ratio of 14.5, which is reasonable in light of Yum’s growing Asian operations. Yum Brands is a buy.

BUCKEYE PARTNERS L.P. $54 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 51.4 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.6; Dividend yield: 6.9%; WSSF Rating: Average) operates over 8,700 kilometres of pipelines in the northeastern and midwestern U.S. that pump gasoline, jet fuel and other petroleum products. The partnership also operates 3,900 kilometres of pipelines on behalf of major oil and chemical companies. Aside from pipelines, it owns oil and natural-gas storage terminals and other related businesses. Fewer people are flying or driving because of the weak economy. That has hurt fuel demand, and Buckeye’s revenue. In response, the partnership has laid off 260 employees, or 25% of its workforce. This cost Buckeye $29.1 million in severance and other one-time payments. However, it expects these measures will lower its annual expenses by $18 million to $22 million by mid-2010. If you exclude restructuring charges, Buckeye’s earnings rose 26.4% in the three months ended September 30, 2009, to $58.9 million from $46.6 million a year earlier. Earnings per unit gained 20.0%, to $0.90 from $0.75, on more units outstanding. The gains came mostly from lower costs, as revenue fell 14.7%, to $423.4 million from $496.2 million....