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Mega Cap Stocks with P/S Ratios under 1
Posted by: Holly LaFon (IP Logged)
Date: March 23, 2012 05:02PM
GuruFocus’ new All-in-One Screener makes it easy to sift through the world of stocks to find exactly the type you are looking for. For example, you can find stocks that have a minimum market cap of $200 billion and P/S ratio under 1. Go to the Description tab and set the Min Market Cap to $200 billion, then under the Valuation tab set the Max P/S to 1.0. The screener finds the stocks and reports them below. They are: Chevron Corp. (CVX), Royal Dutch Shell (RDS.A)(RDS.B), Walmart Stores (WMT) and Exxon Mobil Corp. (XOM). Three of the four companies in the screener are in the oil & gas industry. Fourth-quarter revenues for the U.S. industry overall were up $60.3 billion from the same quarter last year due largely to higher oil prices. Crude oil prices in the fourth quarter averaged $109 a barrel, compared to $88 a barrel in the fourth quarter 2010.
The P/S ratio is used to find cheap stocks and is defined as the price per share divided by the revenue per share for the trailing 12 months.
Chevron Corp. (CVX)
Chevron Corp. is an oil integrated oil company and the second largest oil company in the world with a $210.6 billion market cap. It has a P/S ratio of 0.8, slightly higher than the industry average of 0.7.
In the last year, Chevron’s stock price has bounced within a 52-week range of $86.68 to $112.28 per share, and traded in the upper end of the range since the beginning of 2012. Meanwhile, its P/S ratio has fallen to the lower end of its range as the company reported increased sales of $60 billion in the fourth quarter 2011, compared to $54 billion in 2010, which pushed up the trailing 12 month revenue figure. The stock price has been relatively flat since the beginning of the first quarter 2012.
Chevron’s price recently fell several dollars after it asked Brazilian authorities to shutdown production on its Frade oil field off the coast of Brazil due to an oil seep. The move would put its entire Brazilian oil production on hold. The company is also diversifying more into natural gas, particularly off the coast of Australia, where it recently made its twelfth offshore natural gas discovery since mid-2009. Its development there is positioning it for greater growth.
Over the last three years, Chevron has been growing its gross, operating and net margins, and has a debt to equity ratio of .08% — also at a three-year low.
Royal Dutch Shell (RDS.A)(RDS.B)
Royal Dutch Shell is worldlide independent oil & gas company that produces more than 3 million barrels of oil equivalent (BOE) per day with a $223 billion market cap. Its P/S ratio is 0.5 compared to the industry average 0.7.
Shell’s P/S ratio dropped in the fourth quarter when it reported higher sales of $115.6 billion, compared to $100.1 billion the same quarter the prior year, pushing up the trailing 12-month revenue. Its stock price, meanwhile, has declined since then. The company produced fewer barrels of oil in the fourth quarter — 3.3 million BOE compared to 3.5 million BOE the prior year. It plans to increase production in 2012, but how much will depend on external factors.
Shell is also moving into new territory. In March it signed a production sharing contract with China National Petroleum Corporation (CNPC) to develop a shale gas block in southwestern Sichuan province. It is China’s first shale deal.
In 2011, Shell increased its gross, operating and net margins. The company also has a debt to equity ratio of 18% as of 2011. That figure has increased significantly in recent years, from single digits in the middle of the decade to 11% in 2008, and 23% in 2009 and 2010.
Walmart Stores Inc. operates retail Walmart and Sam’s Club stores around the world as well as Walmart.com. In the last 10 years its stock price has declined 2.1%, while revenues have increased at an annual rate of 10.2%. Its P/S ratio has also declined drastically over the same span of time, from a high near 1.06 in 2003 to 0.51 on Friday. This P/S is equivalent to the industry average of 0.5.
From the latter part of 2011 to date, Walmart’s P/S ratio has been rising. Its stock price in the last six months has increased almost 20%, while revenue increased in the fourth quarter to $123.2 billion compared to $116.4 billion the prior year, pulling up the trailing 12-month figure.
Walmart’s debt to equity ratio has reached a 10-year high of 64%, up from 51% in 2010. It has also kept operating margins between 5.5% and 6.1% for the last decade. Investor Steve Romick said on Bloomberg that Walmart, one of his major holdings, with dividends and buybacks combined, “We think we’re going to end up with a rate of return on this company on a compounded basis, it’s going to be some place in the mid to high single to possibly the low double digits, of course depending on what happens to the P/E multiple, which is not excessive, although admittedly, the stock today is significantly higher than it was last summer when we were accumulating a much larger position in Walmart.”
Exxon Mobil (XOM)
With a market cap of $403.2 billion, Exxon Mobil is the second-largest corporation in the world. It is a global energy business which explores for and produces crude oil and natural gas, manufactures petroleum products, and transports and sells crude oil, natural gas and petroleum products.
The company has a P/S ratio of 0.8 compared to the industry average of 0.7. In the first quarter of 2012 its P/S ratio dropped from 1.12 to its current low level, as its share price has been relatively flat, while revenues increased drastically. Fourth quarter 2011 revenue was $121.6 billion, compared to $105.2 billion in 2010.
Exxon has a debt/equity ratio of 20% in 2011, an increase from 8% in 2010 and single digits for the previous years of the decade. Since 2009 it has been increasing its operating and net margins, while its gross margin shrank from 22.1% in 2010 to 21.8% in 2011.
Find stocks matching any criteria with GuruFocus’ new All-in-One screener here.
Stocks Discussed: CVX, RDS.A, RDS.B, WMT, XOM,