price to sales ratio

The slowdown in the automotive industry has hurt the earnings of these four companies, which serve a number of auto-dependent customers. The potential bankruptcy of General Motors and Chrysler is also a risk factor. However, all four are leaders in their niche markets, which gives them special appeal. Their strong balance sheets will also help them weather the recession. We see all four as particularly attractive buys for long-term gains. GENUINE PARTS CO. $34 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.4 million; Market cap: $5.4 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) distributes automotive replacement parts to over 4,700 independent outlets in North America. It also owns over 1,100 auto parts stores under the NAPA banner....

BRIGGS & STRATTON CORP. $15 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 49.8 million; Market cap: $747 million; Price-to-sales ratio: 0.3; WSSF Rating: Above Average) is the world’s largest maker of engines for lawnmowers. Briggs gets 60% of its revenue from these operations; it gets the remaining 40% by making other home and garden tools, like pressure washers and snow blowers. As a result of the recession, lawnmower makers have cut their orders for new engines, particularly larger engines for riding mowers. Briggs makes more money on these engines than on smaller ones, so this hurt’s the company’s earnings. In its third fiscal quarter, which ended March 31, 2009, Briggs’s earnings fell 34.6%, to $25.4 million, or $0.51 a share, from $38.9 million, or $0.78 a share, a year earlier. Higher income taxes contributed to the earnings drop. Due to the timing of certain events, Briggs’s tax rate rose to 31.4% from 18.3% a year earlier. However, the company’s tax rate for the full fiscal year will drop to a more normal level of around 25%....

The recession has hurt banks’ ability to invest in new automated teller machines (ATMs). However, ATMs will continue to play a major role in many banks’ operations, particularly in developing countries. Rising demand for better security will also prompt banks to upgrade their ATMs. Based on these factors, we feel Diebold and NCR are well positioned to increase their earnings when the economy rebounds. DIEBOLD INC. $26 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 66.2 million; Market cap: $1.7 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s leading makers of ATMs. The company also makes safes, vaults, building-security systems and electronic-voting machines. Diebold continues to lower its risk by cutting its reliance on ATMs. Lately, it has been offering its banking customers more services, including managing ATM networks, processing transactions and upgrading software. Services like these now account for over half of its revenue....

WASHINGTON FEDERAL INC. $12 (Nasdaq symbol WFSL; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 88.1 million; Market cap: $1.1 billion; Price-to-sales ratio: 2.9; WSSF Rating: Average) earned $8.4 million, or $0.10 a share, in its second fiscal quarter, which ended March 31, 2009. That’s a 76.3% drop from its year-earlier earnings of $35.5 million, or $0.40 a share. Washington Federal raised its loan-loss provisions during the quarter, to $54 million from $9.5 million a year earlier. This was the main reason for the decline. Moreover, the bank warns that rising defaults on residential and commercial mortgages will keep its loss provisions at a high level in its third fiscal quarter. Washington Federal is a hold.

BROADRIDGE FINANCIAL SOLUTIONS INC. $19 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 140.4 million; Market cap: $2.7 billion; Price-to-sales ratio: 1.2; WSSF Rating: Extra Risk) sells investor communications, securities-processing and transaction-clearing services to the investment industry. The company has launched a new web site (www.theinvestornetwork.com) that lets investors discuss a wide variety of topics, but they have to register through their broker to participate. This limits fraudulent posts aimed at inflating stock prices, the company says, but is also apt to please Broadridge’s broker-clients. Broadridge also plans to let companies use this site to supplement their annual meetings. This will help them cut their investor-relations costs. Broadridge is a buy....

CEDAR FAIR L.P. $9.95 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.6 million; Market cap: $553.2 million; Price-to-sales ratio: 0.6; WSSF Rating: Average) has cut its quarterly distribution by 47.9%, to $0.25 a unit from $0.48. The new annual rate of $1.00 yields 10.1%. The cut should help the partnership pay down $200 million of its $1.8 billion long-term debt over the next three years. In order to pay down more debt, Cedar Fair is looking at selling its amusement parks in Minneapolis, Kansas City and Santa Clara, California. It also wants to sell some land near Cleveland and Toronto. The recession will probably limit interest in these properties, but Cedar Fair’s eight remaining parks should continue to generate enough cash flow to let it meet its obligations. Cedar Fair is a buy.

INTEL CORP. $16 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.6 billion; Market cap: $89.6 billion; Price-to-sales ratio: 2.6; WSSF Rating: Above Average) is the world’s largest maker of computer chips, with about 80% of the market. Computer makers Dell and Hewlett-Packard are Intel’s main customers, and accounted for 38% of its 2008 revenue. The recession has hurt computer sales. This, in turn, has lowered demand for Intel’s chips. Moreover, customers are switching to cheaper computers, including “netbooks,” which are smaller than traditional laptops and have less-powerful processors. Intel earns smaller profits on chips for netbook computers than from regular desktops and laptops.

Sales, earnings still below 2005 highs

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MDS INC. $6.30 (Toronto symbol MDS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 120.1 million; Market cap: $756.6 million; Price-to-sales ratio: 0.6; SI Rating: Average) is a life-sciences company that sells its goods and services in three fields: contract drug research (on behalf of pharmaceutical companies), analytical devices (which scientists use to detect diseases) and medical isotopes for cancer research. In its fiscal first quarter, which ended January 31, 2009, MDS’s earnings fell 89.5%, to $2 million, or $0.02 a share, from $19 million, or $0.16 a share, a year earlier (all amounts except share price in U.S. dollars). If you disregard a one-time writedown of an investment in a small biotech company and other charges, per-share earnings fell 14.3%, to $0.06 from $0.07. MDS has completed 80% of its restructuring plan, which began in 2008 and included cutting 210 jobs, or 4% of the company’s workforce. The plan saved MDS $14 million in its latest quarter....

DUNDEE CORP. $5.10 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 74.3 million; Market cap: $378.9 million; Price-to-sales ratio: 0.3; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. Its main asset is its 49% stake (63% voting interest) in Dundee-Wealth Inc. (Toronto symbol DW). DundeeWealth provides investment management, securities brokerage, financial planning and investment advisory services. It also owns the Dynamic family of mutual funds. In all, Dundee-Wealth manages $56.2 billion worth of assets. In 2008, Dundee lost $196.3 million, or $2.62 a share. The loss was largely caused by writedowns of securities, including a $113.8-million charge related to its holdings of asset-backed commercial paper. In 2007, Dundee earned $277.6 million, or $3.49 a share. This figure included a $136.6-million gain on the sale of subsidiaries. Revenue fell 12.2%, to $1.2 billion from $1.4 billion. Dundee’s stock continues to be held back by fears of more writedowns of illiquid securities. As well, lower prices for oil, gold and other commodities have hurt the value of its resource-related investments. The recession could also hurt Dundee’s residential real-estate development business....

GREAT-WEST LIFECO INC. $16 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 943.9 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.6; SI Rating: Above Average) is Canada’s largest insurance company. Great-West administers $339 billion worth of assets. The company also offers wealth-management services. It operates in Canada (55% of its earnings), Europe (35%) and the U.S. (10%). Power Corp. (Toronto symbol POW) owns 72.7% of Great-West’s shares. In August 2007, Great-West paid $4.2 billion for U.S.-based mutual-fund manager Putnam Investments. Buying Putnam gave Great-West an opportunity to cross-promote its products to Putnam’s large base of individual and institutional clients. The stock market downturn has lowered the value of Putnam’s assets. This hurts Putnam’s earnings, since its fees rise and fall with the value of the securities in its funds. Moreover, the market’s volatility has caused many of Putnam’s clients to redeem their funds. Consequently, Putnam’s assets under management fell 27% in 2008, to $129 billion U.S. from $176.7 billion U.S. in 2007....