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Stocks at Historical Low P/S Ratios

Holly LaFon

Holly LaFon

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According to GuruFocus’ List of Historical Low P/S Ratios, these are the stocks near their historical low P/S ratios: CACI International Inc. (CACI), Northwest Bancshares Inc. (NWBI), Blackrock Inc. (BLK), WalMart Stores (WMT) and Ascena Retail Group Inc. (ASNA). Most of the companies on the list are highly profitable but their share prices were reduced due in large part to a drop in the overall market.

CACI International Inc. (CACI)

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. Cl A has a market cap of $1.48 billion; its shares were traded at around $49.02 with a P/E ratio of 11 and P/S ratio of 0.4. CACI International Inc. Cl A had an annual average earnings growth of 15.7% over the past 10 years. GuruFocus rated CACI International Inc. Cl A the business predictability rank of 4.5-star.

CACI released its annual 10-K for 2011 on August 29. Revenue increased to $3.6 billion from $3.2 billion in 2010. Approximately 11.6% of the revenue growth was organic and the remaining 2% resulted from acquisitions completed in 2010 and 2011. Revenue has increased each consecutive year since 2002.

The company also has very little debt on its balance sheet, $572 million, and cash of $165 million. Free cash flow has trended up over the last decade.

Considering CACI’s solid financial results and a profitable business, CACI’s stock flagged toward the end of July due to the market sell-off and not seemingly for any sudden change in the business, bringing down its P/S ratio to indicate a bargain.

Northwest Bancshares Inc. (NWBI)

Northwest Bancorp Inc. is a bank holding company whose sole activity is the ownership of all of the issued and outstanding common stock of Northwest Savings Bank and the majority ownership of Jamestown Savings Bank. Northwest Bancshares Inc. has a market cap of $1.2 billion; its shares were traded at around $11.63 with a P/E ratio of 20.4 and P/S ratio of 2.7. The dividend yield of Northwest Bancshares Inc. stocks is 3.8%. Northwest Bancshares Inc. had an annual average earnings growth of 25.9% over the past 10 years. GuruFocus rated Northwest Bancshares Inc. the business predictability rank of 4-star.

The company’s stock price had already been tumbling since early July when they released their financial results on July 25, after which it plummeted further. It reported net income of $15 million, a decrease of $1.1 million over the same quarter of 2010 when net income was $16.1 million. The decrease in earnings was attributed to additional expense from its stock benefit plan. Revenue has been steady since 2006, not leaving the lower $400 million range. Trailing 12 month revenue at June 31, 2011, was $427 million, down slightly from $431 million in 2010.

The company also kept debt quite stable. Long term liabilities and debt are at $5.8 billion compared to $5.7 billion in the second quarter of 2010. Its cash has been declining, however, from $1.1 billion in 2009 to $713 million at June 30, 2011.

Northwest Bancshares has shown considerable resilience through market downturns. Its price has return to similar levels as before 2008, and after the July-August dip it has returned to similar levels as earlier in the year.

Blackrock Inc. (BLK)

BlackRock Inc. is one of the largest investment management firms in the United States. Blackrock Inc. has a market cap of $20.06 billion; its shares were traded at around $148.55 with a P/E ratio of 12.3. Its P/S ratio of 2.3 is close to its 10-year low of 2.25. The dividend yield of Blackrock Inc stocks is 3.7%. Blackrock Inc. had an annual average earnings growth of 24.9% over the past 10 years.

This financial giant’s P/S ratio has dipped even below its post-market crash low of 2.4 in early 2009. Revenue since them made a strong recovery. It jumped from $4.7 billion in 2009 to $8.6 billion in 2010. Trailing 12-month revenue is even higher at $9.2 billion. Blackrock is showing record revenues with a relatively low price due to the stock market decline in July-August.

Free cash flow has also jumped to a record high of $2.3 billion after trending upward over the last decade.

Blackrock had 3% higher assets under management according to its financial report for the six months ended June 30, 2011 compared to the six months ended Dec. 31, 2011. It had a total of $3.659 trillion compared to $3.561 trillion. “The increase in AUM primarily was attributable to $89 billion in market appreciation, $53 billion of net subscriptions in long-term products excluding merger-related outflows, and a $37 billion increase due to foreign exchange movements, partially offset by $28 billion of total BGI merger-related outflows, $34 billion of cash management net outflows and $19 billion of advisory distributions and outflows,” the company said.

Walmart Stores (WMT)

Walmart Stores Inc. is the world's largest retailer. Walmart Stores has a market cap of $178.18 billion; its shares were traded at around $51.31 with a P/E ratio of 11.8 and P/S ratio of 0.4, close to a 10-year low of 0.41. The dividend yield of Walmart Stores stocks is 2.8%. Walmart Stores had an annual average earnings growth of 11.1% over the past 10 years. GuruFocus rated Walmart Stores the business predictability rank of 5-star.

Walmart Stores has been visiting historical P/S ratio levels multiple times over the last several years. It has been in a singular situation of having achieved 10% 10-year revenue growth and reached record revenue of $421.9 billion, while seeing its stock price rise just 4.91% over the last 10 years. Year to date, the stock is down 4%, creating another near-historic low P/S ratio.

In 2010, Walmart’s free cash flow declined to $11.4 billion, its lowest since 2008. In 2009 it generated $12.4 billion and in 2010, $15 billion. In the 13 weeks ended July 29, Walmart’s total comparable store/club sales increased 9.6%, a sixth straight quarter of comp improvement for Sam’s, and decreased .9% for U.S. stores. Walmart looks to continue its growth with recent acquisitions of Netto stores in the UK and Massmart in sub-Saharan Africa.

Ascena Retail Group Inc. (ASNA)

Ascena Retail Group, Inc, formerly known as The Dress Barn, Inc. Ascena Retail Group Inc. has a market cap of $2.12 billion; its shares were traded at around $27.2 with a P/E ratio of 11.7 and P/S ratio of 0.7, close to 10-year low of 0.68. Ascena Retail Group Inc. had an annual average earnings growth of 17.2% over the past 10 years. GuruFocus rated Ascena Retail Group Inc. the business predictability rank of 4.5-star.

Ascena has almost a 10-year streak of improving annual revenue, most recently reaching $2.4 billion in 2010. EBITA was declined annually from 2007 to 2009, but more than doubled from $105 in 2009 to $217 million in 2010. Free cash flow has increased annually from 2008 to 2010, when it reached $166 million. Margins have been notably stable.

Ascena did begin to rack up debt and liabilities in 2010, garnering approximately $458 million. But it has since paid some of that off and had $310 million at the quarter ended March 30, 2011. Ascena actually has more cash on hand than debt at the end of the same period, at $367 million.

The company’s share price was also victim of the market dip from July-August. During Aug. 3 to Aug. 8 alone, the stock fell 18%. However, the company’s fourth quarter results, reported Sept. 14, 2011, showed earnings of $28.2 million, down from $42 million the same quarter last year. Lower results were attributed to one-time charges and the year’s quarter being one week shorter. Total quarterly revenue rose 2% to $725.8 million.

More stocks at historical low P/S ratios can be found at GuruFocus’ List of Historical Low P/S Ratios.


Rating: 3.3/5 (17 votes)

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