Companies at Historically Low Price/Sales Ratios
As we introduced in the page of Broad Market Valuations, the single most important factor in Warren Buffett’s market valuation is the ratio of total market cap (TMC) over gross national product (GNP). He uses this ratio as a gauge to measure the overall valuation of the stock market. If you apply this ratio to the valuation of a business, it is the price/sales ratio of the company stock.
We have developed a new page which screens high quality companies sold at historical low P/S ratios. These companies have been very predictable in their business operations, their sales and earnings have consistently grown for at least the past decade. However the price/sales (P/S) ratios of these companies are less than 30% above their historical lows.
This low P/S strategy has been applied by Arnold Van Den Berg and Ken Fisher in their investing. GuruFocus has added the requirement of high business predictability to this strategy.
One interesting stock in this list is Wal-Mart (NYSE:WMT). The business has been highly predictable, ranked 5-star in Business Predictability; it is likely to continue its business trend for the foreseeable future. The historical low P/S ratio is 0.46, currently it is 0.5, the stock is about 15% above its 52-week low.
For the complete list, go to high quality companies sold at historical low P/S ratios.
Companies at Historical Low Price/Book Ratios
In Ben Graham’s value strategies, book value of a company stock played an important role. However, in modern times, stocks are rarely sold at below book values, except those in the list of Ben Graham NCAV Bargains.
We have also developed a new page which screens high quality companies sold at historical low P/B ratios. These companies have been very predictable in their business operations, their sales and earnings have consistently grown for at least the past decade. However the price/book (P/B) ratios of these companies are less than 30% above their historical lows.
The first company in this list is Valero Energy Corp. (NYSE:VLO). It is ranked 5-star in business predictability, and has a price/book ratio of 0.6, with a historical low of 0.48 and historical high of 3.19. The stock is only a few percent above its 52-week low. It is a recommendation of David Dreman in his most recent Forbes column (Don't Be A Chicken Little).
If you believe the market valuation will reverse to the mean, it is likely that the companies in these two pages will have good potential in the appreciation of market values. These companies have been consistent with their sales and earning growth. It is not guaranteed that they will continue the trends, but it is very likely that they will.
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