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Stocks Trading at Historical Low P/S Ratios
Posted by: Holly LaFon (IP Logged)
Date: September 19, 2012 09:52PM
Like the P/E and P/B ratios, the P/S (price to sales) ratio is used to determine the relative value of a stock. It is calculated by dividing a company’s share price by its revenue per share for the trailing 12 months. The result shows how much value the market is assigning to each dollar of the company’s sales. The lower the P/S ratio, the more attractive the stock. Because the ratio is limited to describing the company’s sales, it is also important to look at other factors in a low-P/E stock, including profit margins and debt.
These stocks currently are at their historical low P/S ratios: CACI International (CACI), Career Education Corp. (CECO) and Komatsu Ltd. ADR (KMTUY).
CACI International Inc. (CACI) is traded at P/S ratio of 0.3, close to its 10-year low of 0.3. CACI stock is owned by seven Gurus.
CACI International Inc provides the IT and network solutions needed to prevail in today's new era of defense, intelligence and e-government. CACI International Inc. has a market cap of $1.24 billion; its shares were traded at around $55.21 with a P/E ratio of 9.2 and P/S ratio of 0.3. CACI International Inc had an annual average earnings growth of 16.1% over the past 10 years. GuruFocus rated CACI International Inc. the business predictability rank of 4.5-star.
Over the last decade months, CACI International’s stock price has increased 41%. In the same period, its revenue per share has been increasing at an annual rate of 18.6% annually.
Though the company’s growth has been rapid over the last decade, uncertainty about government budgets weighed on the stock this year, when it increased 8%. Also, in the quarter ended March 31, 2012, CACI said that it did not expect the rate of growth of recent years to continue in fiscal 2013 due to uncertainty in the government budget process, delays in government procurement activities and the drawdown in Southeast Asia.
In fiscal year 2012, CACI expanded its operating margin to 4.4%, its highest level since 2006, from 4% in 2011. It ended the year with about $644.7 million in cash on its balance sheet, from $738 million in 2011, and about $744 million in long-term liabilities and debt, from $573 in 2011.
Career Education Corp. (CECO) is traded at a P/S ratio of 0.1, close to its 10-year low of 0.1. It is owned by seven Gurus.
Career Education Corporation is a provider of private, for-profit post-secondary education with campuses throughout the U.S., Canada, UK and the United Arab Emirates. Career Education Corp. has a market cap of $244.6 million; its shares were traded at around $4.045 with a P/E ratio of 3.8 and P/S ratio of 0.1. Career Education Corp. had an annual average earnings growth of 9.4% over the past 10 years. GuruFocus rated Career Education Corp. the business predictability rank of 2.5-star.
The company has increased its revenue per share at an annual rate of 13.2% over the last 10 years. Meanwhile, its share price has declined 82%. In the last year, it has declined 74%, primarily due to events plaguing its industry. In July, the Senate Health, Education, Labor and Pensions Committee released a report summarizing the findings of its two-year investigation into 30 for-profit higher-education companies. The report criticizes for-profit colleges’ recruitment tactics, financial aid practices and retention rates.
"We are facing the same stiff headwinds as others in private sector higher education,” Career Services’ Chairman, President and CEO Steven H. Lesnik said in a statement. “Withering public criticism, combined with a game-changing regulatory environment aimed at reducing the role of private sector educational institutions, is effectively constraining growth. We are dealing with these headwinds like others, but progress is slow.”
In the quarter ended June 30, the company reported total revenue of $369 million and a net loss of $100.2 million, or $1.52 per diluted share, compared to $484.9 million and $55.4 million or $0.73 per share last year. At quarter end, it had $427.7 million in cash on its balance sheet, down from $450.2 million a year ago. It has no long-term debt and $167 million in long-term liabilities, down from no long-term debt and $177 million in long-term liabilities a year ago.
Komatsu Ltd. ADR (KMTUY) is traded at a P/S ratio of 0.8, close to its 10-year low of 0.8. It is owned by one Guru.
Komatsu Ltd., headquartered in Tokyo, Japan, is the world's second largest manufacturer of earthmoving and construction machines, with annual revenues of 7,580 million euros. Komatsu Ltd. (adr) has a market cap of $20.09 billion; its shares were traded at around $21.09 with a P/E ratio of 10.8 and P/S ratio of 0.8. The dividend yield of Komatsu Ltd. (adr) stocks is 2.2%. Komatsu Ltd. (adr) had an annual average earnings growth of 16.4% over the past 10 years. GuruFocus rated Komatsu Ltd. (adr) the business predictability rank of 2.5-star.
Komatsu’s revenue per share has increased at an annual rate of 10.1% over the last ten years, and increased 7.5% in the last 12 months. In the last 12 months, its stock price has declined almost 9%.
After rising for most of the year, Komatsu’s stock began to decline in late April on the announcement of lowered mid-year and full-year outlook for fiscal year 2013. The company lowered its full-year revenue expectations from JPY 2,100,000 million to JPY 1,970,000 million, a 6% year-over-year increase, and net profit from JPY 190,000 million to JPY 157,000 million, for the year ended March 2013. The decrease was primarily due to lower sales, though it is anticipating that sales and profit will continue to improve in construction, mining and utility equipment as demand for construction equipment in Japan and North America increases, and sales of equipment and parts, and mining equipment business sales increase.
In the fiscal year ended March 31, 2012, the company’s construction, mining and equipment business suffered the effects of drastically lower demand in China, as well as the appreciation of the Japanese yen. Komatsu derives 14% of its sales from China. This was partially offset by increase construction equipment sales in other regions, as well as mining equipment and parts, improved selling prices and reduced costs.
Komatsu’s has cash holdings of $1.1 billion, up from $1 billion a year ago. Its long-term liabilities and debt total about $4.8 billion, down from about $5 billion a year ago.
For more companies, check out GuruFocus’ list of companies that are traded at historical low P/S ratios.
Stocks Discussed: CACI, CECO, KMTUY,