price to sales ratio

TUPPERWARE BRANDS CORP. $40 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 63 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.3; WSSF Rating: Above Average) makes plastic food and beverage containers. It also makes beauty products. The company sells its products through a network of independent dealers instead of traditional retail stores. This keeps its distribution costs low. Tupperware gets over 80% of its sales from outside of the U.S., so it’s particularly vulnerable to a rising U.S. dollar. In the three months ended June 27, 2009, sales fell 10.1%, to $524.7 million from $583.6 million a year earlier. But if you disregard foreign-exchange rates, its sales would have risen 4%. Earnings fell 7.1%, to $0.52 a share (or a total of $33.1 million) from $0.56 a share (or $36.0 million). However, earnings rose 42% on a constant-currency basis. The company is selling more high-margin products; this was the main reason behind the earnings gain. Tupperware also benefited from lower resin and freight costs....

NEWELL RUBBERMAID INC. $16 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 277.7 million; Market cap: $4.4 billion; Price-to-sales ratio: 0.7; WSSF Rating: Average) makes plastic storage bins, tools, window blinds, pens and a number of other household items. Its top brands include Rubbermaid, Sharpie, Paper Mate, Waterman and Levolor. In response to falling sales, Newell is closing plants and streamlining its distribution operations. It’s also selling low-margin businesses, particularly those that use large amounts of plastic resins. These are made from oil, so these moves will cut Newell’s exposure to volatile oil prices. In all, the company will pay $475 million to $500 million in severance and other costs. However, the plan should lower Newell’s costs by $175 million to $200 million a year by the end of 2010. So far, the company has realized $100 million of these savings....

SHERWIN-WILLIAMS CO. $61 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 116.3 million; Market cap: $7.1 billion; Price-to-sales ratio: 1.0; WSSF Rating: Above Average) is North America’s largest paint producer. The company gets 60% of its sales from its over 3,300 paint stores. The slowdown in new U.S. housing construction has hurt demand for Sherwin’s paints. As well, many consumers have put off home-renovation projects because of the recession. In the three months ended June 30, 2009, Sherwin’s earnings fell 8.0%, to $158 million from $171.7 million a year earlier. However, the company is an aggressive buyer of its own shares, so it had fewer shares outstanding during the quarter. As a result, earnings per share fell 6.9%, to $1.35 from $1.45. Sales fell 12.6%, to $1.9 billion from $2.2 billion....

PROCTER & GAMBLE CO. $57 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.9 billion; Market cap: $165.3 billion; Price-to-sales ratio: 2.1; WSSF Rating: Above Average) is one of the world’s largest makers of household and personal-care products. Some of its top brands are Tide detergent, Head & Shoulders shampoo, Pampers diapers and Crest toothpaste. Procter is selling some of its slower-growing businesses and shifting its focus to those with better long-term prospects. In November 2008, it sold its Folgers coffee business for a $2-billion gain. Last August, it agreed to sell its prescription-drug division for $3.1 billion. The sale should close later this year. In the fiscal year ended June 30, 2009, Procter’s earnings fell 4.3%, to $11.3 billion from $11.8 billion in the prior year. However, earnings per share rose 0.6%, to $3.58 from $3.56, on fewer outstanding shares. If you exclude unusual items in both years, earnings per share would have risen by 7.6%, to $3.67 from $3.41. Sales fell 3.3%, to $79 billion from $81.7 billion. Overseas markets account for 60% of Procter’s sales, and the higher U.S. dollar cut the value of these sales by $4 billion....

3M COMPANY $74 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 698.3 million; Market cap: $51.7 billion; Price-to-sales ratio: 2.3; WSSF Rating: Above Average) is a diversified manufacturing firm. The company was formerly known as Minnesota Mining & Manufacturing. 3M owns a large number of well-known brands. Post-it notes, Scotch tape, Scotch-Brite household-cleaning products, Scotchguard protection and Thinsulate insulation are just a few. The company has six business segments. These are the industrial and transportation division, which supplies roughly 31% of 3M’s sales and 29% of its profits, health care (17%, 23%), safety, security and protection (14%, 14%), consumer and office (14%, 13%), display and graphics (13%, 11%), and electronics and communications (11%, 10%)....

Price-to-sales is one of the key financial ratios we look at when we assess a company. That’s 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 shares outstanding). Price-to-sales, or p/s, is one of the financial ratios you’ll find displayed with every stock we cover in our Successful Investor newsletter. The basic rule is that a high p/s tends to mean that a stock is expensive, and a low p/s tends to mean that a stock is cheap. However, many individual stocks seem to run counter to this rule. Stocks with deservedly high p/s ratios can rise for lengthy periods, and stocks with deservedly low p/s ratios can fall....

U.S. industrial production fell 1.1% in May, and by 0.4% in June, but swung to a 1.0% gain in July. Production slipped slightly in August, but was still positive, at 0.8%. That’s good news for 3M. Because of its large product line (it makes over 55,000 different items), the company’s earnings and share price tend to reflect U.S. manufacturing activity. 3M also stands to gain from any uptick in consumer spending. Moreover, the company is aggressively cutting its costs. This should help fuel its earnings growth as the global economy recovers. 3M COMPANY $74 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 698.3 million; Market cap: $51.7 billion; Price-to-sales ratio: 2.3; WSSF Rating: Above Average) is a diversified manufacturing firm. The company was formerly known as Minnesota Mining & Manufacturing. 3M owns a large number of well-known brands. Post-it notes, Scotch tape, Scotch-Brite household-cleaning products, Scotchguard protection and Thinsulate insulation are just a few....

CONAGRA FOODS INC. $22 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 443.1 million; Market cap: $9.7 billion; Price-to-sales ratio: 0.8; WSSF Rating: Above Average) has sold most of its fresh-food and animal-feed businesses over the past few years to focus on its more profitable packaged-food operations. ConAgra’s major brands include Chef Boyardee pasta, Hunt’s ketchup and Peter Pan peanut butter. In the three months ended August 30, 2009, ConAgra’s earnings per share rose 40.7%, to $0.38 from $0.27 a year earlier. These figures exclude unusual items. Lower ingredient costs were the main reason behind the gain. As well, the company stopped making certain low-margin products. Sales fell 3.1%, to $3 billion from $3.1 billion. Consumer products, which account for about two-thirds of ConAgra’s overall sales, rose 1% in the quarter. That’s despite lower sales of Slim Jim meat snacks due to a fire at a North Carolina plant last June....

A weak economy is prompting more consumers to choose cheaper generic brands over brand names. That’s dampened the profits of these four leading consumer-products firms. However, they are doing a good job of cutting their costs. This gives them the ability to lower their prices without hurting their profit margins. PROCTER & GAMBLE CO. $57 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.9 billion; Market cap: $165.3 billion; Price-to-sales ratio: 2.1; WSSF Rating: Above Average) is one of the world’s largest makers of household and personal-care products. Some of its top brands are Tide detergent, Head & Shoulders shampoo, Pampers diapers and Crest toothpaste. Procter is selling some of its slower-growing businesses and shifting its focus to those with better long-term prospects. In November 2008, it sold its Folgers coffee business for a $2-billion gain. Last August, it agreed to sell its prescription-drug division for $3.1 billion. The sale should close later this year....

AUTODESK INC. $24 (Nasdaq symbol ADSK; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 229.7 million; Market cap: $5.5 billion; Price-to-sales ratio: 2.8; WSSF Rating: Average) earned $56.7 million, or $0.24 a share, in its second quarter, which ended July 31, 2009. That’s down 56.5% from $130.3 million, or $0.56 a share, a year earlier. These figures exclude costs related to Autodesk’s plan to cut 14% of its workforce in response to lower demand for its 3D-design software. This should save Autodesk $250 million a year, starting next year. Revenue fell 33.0%, to $414.9 million from $619.5 million. However, new government spending on infrastructure projects should spur architectural and engineering firms to buy more of Autodesk’s products. Autodesk is a buy.