price to sales ratio

The recession and the slow pace of the recovery have hurt demand for electrical power at these two midwestern utilities. However, regulators will probably let them raise their rates to cover some of the shortfall. That should help them maintain their dividends and replace aging power plants. Still, we see only Alliant as a buy right now. 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%....

PEPSICO INC. $61 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $97.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.0%; WSSF Rating: Above Average) will pay $900 million for the right to make and distribute certain soft drinks in North America owned by Dr. Pepper Snapple Group Inc. (New York symbol DPS). The price is equal to 52% of the $1.7 billion, or $1.09 a share, that PepsiCo earned in the third quarter of 2009. This new 20-year contract replaces existing deals with PepsiCo’s two main bottlers, which the company is buying in 2010. Dr. Pepper drinks account for around one-third of the bottlers’ profits, so extending this licensing deal enhances their prospects. PepsiCo is a buy.

H&R BLOCK INC. $21 (New York symbol HRB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 335.5 million; Market cap: $7.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.9%; WSSF Rating: Above Average) is best known for its income-tax preparation business, but it also sells accounting services to businesses through wholly owned RSM McGladrey. This subsidiary recently ended a legal dispute with auditing firm McGladrey & Pullen LLP. The companies also renewed their alliance until 2015. Ending the alliance would have been difficult, since both firms share employees and office space. They also serve many of the same clients. H&R Block is a buy. TEXAS INSTRUMENTS INC. $26 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $33.8 billion; Price-to-sales ratio: 3.3; Dividend yield: 1.8%; WSSF Rating: Average) is seeing stronger demand for its chips, but is having trouble filling new orders. Still, the company expects that its revenue will range between $2.9 billion and $3.02 billion in the fourth quarter of 2009. That’s slightly better than its earlier forecast of $2.78 billion to $3.02 billion. As well, Texas Instruments expects its per-share earnings for the quarter to range from $0.47 to $0.51. That’s up from its previous estimate of $0.42 to $0.50....

UNITED TECHNOLOGIES CORP. $70 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 937.5 million; Market cap: $65.6 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.2%; WSSF Rating: Above Average) is buying 49.5% of U.K.-based Clipper Windpower PLC. Clipper makes turbines and other equipment for wind-power projects. United Technologies is paying $271 million. That’s equal to 26% of the $1.1 billion, or $1.14 a share, that it earned in the three months ended September 30, 2009. Clipper is currently losing money. However, demand for wind-power equipment is growing strongly as countries look for ways to cut their fossil-fuel use. Clipper should also benefit from United Technologies’ jet-engine and fuel-cell expertise. Moreover, it can use United Technologies’ distribution network to increase its sales....

TERADATA CORP. $32 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector: Shares outstanding: 171.2 million; Market cap: $5.5 billion; Price-to-sales ratio: 3.3; No dividends paid; WSSF Rating: Average) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends. This helps its clients make better business decisions. The company gets 55% of its revenue from North and South America, followed by Europe (25%) and Asia (20%). The company was a wholly owned subsidiary of NCR Corp. until October 1, 2007. That’s when NCR handed out its Teradata shares to its own shareholders as a special dividend.

Followed usual spinoff pattern

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TORSTAR CORP. $6.25 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.0 million; Market cap: $493.8 million; Price-to-sales ratio: 0.4; Dividend yield: 5.2%; SI Rating: Above Average) publishes The Toronto Star, which is Canada’s largest daily newspaper in terms of circulation. The company also publishes three other daily papers and over 100 weeklies, mainly in southern Ontario. Newspapers and web sites account for about 70% of Torstar’s revenue, and 60% of its earnings. The company’s other main business is wholly owned Harlequin Enterprises Ltd., the world’s leading publisher of romance novels. Harlequin also publishes non-fiction titles, such as self-help and diet books. Torstar’s aggressive cost cutting has helped it stay profitable in the face of falling advertising revenue and increased competition from the Internet. For example, it has cut roughly 8% of its workforce over the past year. These layoffs lowered the company’s expenses by $26.2 million in the first three quarters of 2009. Torstar expects to realize an additional $8.2 million in savings in the fourth quarter....

TRANSCONTINENTAL INC. $12 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.8 million; Market cap: $969.6 million; Price-to-sales ratio: 0.3; Dividend yield: 2.7%; SI Rating: Average) is the largest commercial printer in Canada, and the sixth-largest in North America. This business provides 60% of its revenue and profit. The company also publishes newspapers and magazines (25% of revenue, 30% of profit). As well, its marketing communications division (15%, 10%) designs direct mail and other advertising campaigns, and analyzes customer-purchasing data. These services help its clients expand sales and build loyalty. The stock fell to $5.42 last March. That’s because the recession hurt the company’s direct-mail volumes. As well, many of its clients are U.S.-based financial institutions. Higher credit losses prompted many of these customers to cut their advertising spending. Transcontinental has cut its costs in response. This involved closing a direct-mail plant in Pennsylvania and merging some printing plants. So far, these moves have lowered its costs by $50 million a year. It should achieve its goal of $100 million in annual savings sometime next year....

THOMSON REUTERS CORP. $34 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 829.7 million; Market cap: $28.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 3.5%; SI Rating: Above Average) has two main divisions: Markets accounts for 60% of revenue, and sells financial-information products to banks and other financial institutions. Professional (40% of revenue) sells specialized information to professionals in the legal, accounting, scientific and health-care fields. The company gets about 60% of its revenue from the Americas, followed by Europe (30%) and Asia (10%). The financial crisis prompted banks and brokerage firms to cut spending on information products. As a result, Thomson Reuters’ revenue fell 3.7% in the third quarter of 2009, to $3.2 billion from $3.3 billion a year earlier (all amounts except share price and market cap in U.S. dollars). Earnings fell 8.5%, to $0.43 a share (or a total of $359 million), from $0.47 a share (or $392 million). Thomson is taking advantage of the slump in the financial industry to expand its operations. For example, it will pay an undisclosed sum for breakingviews.com, a privately held web site that supplies financial news and commentary....

METRO INC. $37 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 108.5 million; Market cap: $4.0 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.5%; SI Rating: Average) is Canada’s third-largest supermarket operator, after Loblaw and Sobeys. Metro operates roughly 660 grocery stores in Quebec and Ontario. Its major banners include Metro, Super C and Food Basics. The company also operates or supplies around 270 drug stores. Eighty-one of these are located inside its supermarkets. Aside from its grocery business, Metro owns roughly 23% of Alimentation Couche-Tard Inc. (Toronto symbol ATD.B). Couche-Tard has more than 3,500 convenience stores in the U.S., and is the largest convenience-store operator in Canada, with over 2,000 outlets. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. Based on Alimentation Couche-Tard’s current stock price, this investment accounts for 23% of Metro’s market cap. Couche-Tard is a recommendation of Stock Pickers Digest, our publication for aggressive investors....

For most of its 62-year history, grocery-store operator Metro focused solely on its home province of Quebec. In 2005, it successfully expanded to Ontario with its acquisition of the A&P chain. This purchase gave Metro the size it needed to compete with other supermarket chains, such as Loblaw, and with non-traditional food sellers, such as Wal-Mart. The company now aims to build on its recent success with several new initiatives. These include lowering its marketing costs by consolidating its banners and private-label brands. The company is also launching a new customer-loyalty program through a joint venture with a leading marketing firm. That should help it drive long-term sales growth. These initiatives will help Metro thrive in a fiercely competitive industry. Moreover, its stake in convenience-store operator Alimentation Couche-Tard is an overlooked asset....