price to sales ratio
TEXAS INSTRUMENTS INC. $24 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $31.2 billion; Price-to-sales ratio: 2.9; WSSF Rating: Average) is seeing higher demand for its analog chips....
The American Pet Products Association estimates that spending on pets will rise 5% this year, despite the economic slowdown. As well, over 60% of U.S. households now own a pet, and this number is expected to rise. These trends should continue to help these two pet-focused stocks. IDEXX LABORATORIES INC. $52 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 58.6 million; Market cap: $3 billion; Price-to-sales ratio: 3.1; WSSF Rating: Average) makes equipment that veterinarians uses to detect diseases in animals. Idexx also makes systems that detect contaminants in water and milk. Because of the weak economy, fewer pet owners are taking their animals to veterinarians for routine screenings. This has hurt sales of Idexx’s systems and supplies. As well, Idexx gets 40% of its sales from outside the U.S. This leaves it vulnerable to a high U.S. dollar....
WINDSTREAM CORP. $9.62 (New York symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 436.7 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.4; WSSF Rating: Average) will buy privately held Lexcom Inc., which sells telephone and cable services to over 23,000 customers in Lexington, North Carolina. The deal should close by the end of the year. Windstream will pay $141 million for Lexcom. That’s 1.6 times the $90.8 million, or $0.21 a share, that Windstream earned in the latest quarter. The company feels that combining billing and other back-office functions will let it cut its costs by $5 million a year. Windstream is a buy.
Microsoft is planning to release its new Windows 7 operating system on October 22. This should spur computer sales and upgrades. That’s good news for leading chipmakers, such as Intel and Nvidia. Both are also profiting from the growing use of mobile devices to access the Internet. INTEL CORP. $20 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.6 billion; Market cap: $112 billion; Price-to-sales ratio: 3.3; WSSF Rating: Above Average) is the world’s leading computer-chip maker, with 80% of the market. The company is combining its operations into two main divisions. These will be organized by function instead of by product. The first, the Intel Architecture Group, will design chips for computers, cellphones and similar devices. The second, called the Technology and Manufacturing Group, will manage Intel’s manufacturing plants....
APPLE INC. $186 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 895.8 million; Market cap: $166.6 billion; Price-to-sales ratio: 4.8; WSSF Rating: Average) requires iPhone buyers to enter a two-year service contract. Because it offers users free software updates, accounting rules force Apple to spread the value and costs of these sales over two years. This rule has no effect on Apple’s cash flow. A proposed change would let Apple recognize more revenue and profit from the iPhone at the time of sale. It’s a cosmetic change, but it could balloon Apple’s earnings and cut its p/e ratio. Many investors have avoided Apple because it trades at a high 32 times earnings, so a lower p/e could attract new buyers. Apple is a buy.
WESTERN UNION CO. $20 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 701.6 million; Market cap: $14 billion; Price-to-sales ratio: 2.8; WSSF Rating: Above Average) has provided money-transfer services to Cuba since 1999. Cubans living in the U.S. can send money to close relatives in Cuba at over 3,000 of Western Union’s U.S. locations. The company also has 100 locations in Cuba. Western Union should benefit from new rules that have removed limits on the amount and frequency of transfers. Western Union is a buy. NORDSTROM INC. $31 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 216.8 million; Market cap: $6.7 billion; Price-to-sales ratio: 0.8; WSSF Rating: Average) earned $0.48 a share in its second quarter, which ended August 1, 2009. That’s down 26.2% from $0.65 a year earlier....
ENCANA CORP. $58 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.1 million; Market cap: $43.6 billion; Price-to-sales ratio: 1.7; WSSF Rating: Average) will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. The new EnCana will account for about two-thirds of the company’s current production and reserves. Cenovus will account for the remaining third. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets would have made it difficult for the two new, smaller companies to raise capital to fund new projects. Now that conditions have improved, EnCana has decided to go ahead with the split. In September, Cenovus sold $3.5 billion in new long-term notes....
DIAGEO PLC ADRs $63 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 624.9 million; Market cap: $39.4 billion; Price-to-sales ratio: 2.6; WSSF Rating: Above Average) is the world’s largest premium alcoholic-beverage company. (Each American Depositary Receipt represents four Diageo common shares.) London-based Diageo has 28% of the global market. Spirits account for 73% of its sales, followed by beer (22%) and wine (5%). It gets 35% of its sales from North America, 30% from Europe, 10% from Asia, and 25% from the rest of the world. Diageo was formed in 1997 through the merger of GrandMet and Guinness.
High-quality brands cut Diageo’s risk
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ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.1; SI Rating: Above Average) is Canada’s largest bank, with total assets of $659.9 billion. In its third quarter, which ended July 31, 2009, Royal’s earnings rose 23.7%, to $1.6 billion, or $1.05 a share, from $1.3 billion, or $0.92 a share, a year earlier. Revenue rose 32.3%, to $7.8 billion from $5.9 billion. Royal has steadily expanded its capital-markets division over the past few years. Through this subsidiary, the bank helps businesses raise capital by selling shares and issuing debt. It also provides security-trading and research services. Royal gets about a quarter of its revenue from this division....
TORONTO-DOMINION BANK $67 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 854 million; Market cap: $57.2 billion; Price-to-sales ratio: 2.2; SI Rating: Above Average) is the second-largest Canadian bank, with total assets of $544.6 billion. TD has built up its U.S. retail-banking operations in the past few years, mostly through acquisitions. In May 2008, it paid $8.5 billion for Commerce Bancorp Inc. Commerce now operates as “TD Bank,” and has over 1,000 branches from Maine to Florida. TD’s U.S. operations now account for about 20% of its profits. But even with Commerce, earnings at TD’s U.S. operations fell 11% in the bank’s most recent quarter, which ended July 31, 2009. This was mainly because the division’s loan-loss provisions climbed 141% from a year ago. The jump was largely the result of depressed real-estate prices in some markets. It added to a 93.4% rise in TD’s overall loan-loss provisions, to $557 million from $288 million....