price to sales ratio

XEROX CORP. $7.44 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 864.8 million; Market cap: $6.4 billion; Price-to-sales ratio: 0.4; WSSF Rating: Average) earned $985 million before restructuring charges in 2008, down 13.2% from $1.1 billion in 2007. Per-share earnings fell 7.6%, to $1.10 from $1.19 on fewer shares outstanding. Revenue rose 2.2%, to $17.6 billion from $17.2 billion. Xerox gets roughly 50% of its revenue from outside the United States, so the higher U.S. dollar dampened its growth in 2008. Steady demand for services (48% of 2008 revenue) should help Xerox offset weaker demand for new printers and copiers. Recent cuts to its workforce should also save it $200 million a year. Xerox is a buy.

H&R BLOCK INC. $22 (New York symbol HRB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 338.9 million; Market cap: $7.5 billion; Price-to-sales ratio: 5.2; WSSF Rating: Above Average) generates most of its earnings by preparing income tax returns for its clients. It also sells its “TaxCut” tax-preparation software, which lets individuals prepare and electronically file their own returns with the IRS. In December 2008, TaxCut increased its share of the tax software market to 19% from 15% a year earlier. It appears the gain is largely due to a price increase by Intuit Inc., whose TurboTax program controls 80% of this market. Still, customers tend to stick with the same tax program each year, since new versions can easily import data from the previous year’s program. A growing customer base should help increase the long-term profitability of the TaxCut operations. H&R Block is a buy.

CINTAS CORP. $24 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.8 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.9; WSSF Rating: Average) earned $71.8 million in its second fiscal quarter, ended November 30, 2008, down 13.3% from $82.9 million a year earlier. Per-share earnings fell 11.3%, to $0.47 from $0.53. Rising unemployment has hurt demand for Cintas’s uniform rentals and other business services. Cintas now plans to close two of its plants, which should improve its future profitability. Revenue grew just 0.1%, to $985.2 million from $983.9 million. Despite the lower earnings, Cintas reduced its debt by $80 million in the latest quarter. The company’s long-term debt now stands at $869.7 million, which is a manageable 25% of its market cap. Cintas also raised its annual dividend 2.2%, from $0.46 a share to $0.47. It now yields 2.0%. Cintas has increased its dividend each year since it became a public company in 1983. Cintas is a buy.

GENERAL ELECTRIC CO. $14 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.5 billion; Market cap: $147 billion; Price-to-sales ratio: 0.7; WSSF Rating: Above Average) has moved down in the past few months over concerns about the quality of assets at GE Capital, its finance unit, which accounts for a third of its gross profits. Due to writedowns and other charges at GE Capital, GE’s overall earnings fell 19.1% in 2008, to $1.78 a share (a total of $18.1 billion) in 2008, from $2.20 a share (a total of $22.5 billion) in 2007. Revenue grew 13.3%, to $112.8 billion from $99.5 billion. The company now aims to trim its expenses by $1 billion in 2009. That should allow it to keep paying its $1.24 dividend, which yields 8.9%. A dividend cut is still possible, particularly if GE loses its AAA credit rating, which would drive its interest costs up. But GE should benefit from rising government infrastructure spending. GE’s infrastructure businesses accounted for 54% of its 2008 profits. GE is still a buy for long-term gains.

Some investors base buy and sell decisions in part on p/e ratios (the ratio of a stock’s price to its per-share earnings). When we provide a p/e, we try to eliminate all one-time items from earnings. These include writedowns, investment gains or restructuring charges. This gives you a clearer, truer view of a company’s profitability. For decades, investors have used p/e’s to spot undervalued stocks. But a low p/e can signal danger rather than a bargain. That’s why you need to look at p/e ratios in context. In addition to p/e’s, we look at a variety of measures that identify value and risk. One of our favourites is the price-to-sales (p/s) ratio: the share price divided by sales per share....

NEWMONT MINING CORP. $39 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 454.3 million; Market cap: $17.7 billion; Price to- sales ratio: 3.4; WSSF Rating: Average) is one of the world’s largest gold mining companies, with major operating gold mines in the United States, Canada, Australia, Peru, Bolivia and Ghana. Gold accounts for about 85% of Newmont’s revenue. The remaining 15% comes from copper, zinc and other metals. Most of Newmont’s copper comes from its 45% stake in the large Batu Hijau mining complex in Indonesia. Newmont reached its current size mainly through its 2002 acquisitions of Canada’s Franco-Nevada Mining Corp. and Australia’s Normandy Mining Ltd. As part of these acquisitions, Newmont inherited their hedging contracts, which let them lock in future delivery prices. However, Newmont prefers to sell its gold at the floating price. The company maximizes profit by adjusting production based on the prevailing price....

Gold moved up from $300 an ounce in the early part of this decade to over $1,000 in 2008. It fell to $700 in November 2008 as the stock market bottomed out. Like the stock market, gold has regained some of its losses and now trades at around $900. We feel gold will eventually surpass its recent highs. We also feel that the best way to profit from rising gold is through Newmont Mining. Its high-quality mines should last decades, and its costs are coming down. As well, most of its production is in politically stable areas, such as North America and Australia. NEWMONT MINING CORP. $39 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 454.3 million; Market cap: $17.7 billion; Price to- sales ratio: 3.4; WSSF Rating: Average) is one of the world’s largest gold mining companies, with major operating gold mines in the United States, Canada, Australia, Peru, Bolivia and Ghana. Gold accounts for about 85% of Newmont’s revenue. The remaining 15% comes from copper, zinc and other metals. Most of Newmont’s copper comes from its 45% stake in the large Batu Hijau mining complex in Indonesia....

EMERA INC. $22 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 112.1 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.8; SI Rating: Average) generates and distributes electricity to roughly 600,000 customers in Nova Scotia and Bangor, Maine. In the past few years, Emera has steadily expanded into new areas to cut its reliance on Nova Scotia. It owns 12.9% of the Maritimes and Northeast natural gas pipeline, and 50% of a hydroelectric facility in Massachusetts. Emera has also targeted the Caribbean region for new investments, and now owns 19% of the main power utility in St. Lucia and 25% of Grand Bahama Power Co.

New strategy spurred growth

Emera’s revenue fell from $1.15 billion in 2003 to $1.13 billion in 2004. But thanks in part to its new businesses, revenue grew to $1.34 billion in 2007. Coal and oil account for about 80% of Emera’s fuel needs, and higher prices cut earnings from $1.20 a share (total $128.2 million) in 2003 to $1.11 a share ($122.1 million) in 2005. However, new natural gas supply contracts helped offset higher fuel prices. Consequently, earnings improved to $1.36 a share ($151.3 million) in 2007. A one-time accounting gain of $0.08 a share also boosted Emera’s 2007 earnings....

MDS INC. $7.43 (Toronto symbol MDS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 121.1 million; Market cap: $899.8 million; Price-to-sales ratio: 0.5; SI Rating: Average) lost $233 million or $1.91 a share in the fiscal year ended October 31, 2008 (all amounts except share price and market cap in U.S....

TRANSCANADA CORP. $34 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 615.1 million; Market cap: $20.9 billion; Price-to-sales ratio: 3.0; SI Rating: Above average) plans to build a new pipeline called Pathfinder that would transport natural gas from Colorado to North Dakota. The company planned to offset the $2 billion cost of building the new line by selling a minority stake in it to two local gas producers. However, these producers had to withdraw from the project as the credit crisis has hurt their borrowing ability. TransCanada now hopes to find new partners. But even if it has to cancel the Pathfinder project, it’s only a small part of its overall operations. TransCanada is a buy....