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James Li
James Li
Articles (1282)  | Author's Website |

5 Predictable Stocks With Historical Low Price-Sales Ratios

Stocks with strong and consistent earnings growth to weather coronavirus uncertainty

In light of high market uncertainty due to the coronavirus outbreak, five stocks with high business predictability and trading near historical low price-sales ratios are FirstCash Inc. (NASDAQ:FCFS), Omnicom Group Inc. (NYSE:OMC), CVS Health Corp. (NYSE:CVS), J2 Global Inc. (NASDAQ:JCOM) and United Parcel Service Inc. (NYSE:UPS) according to the Historical Low Price-Sales Screener, a GuruFocus Premium value screener.

Fed support for credit markets rescues Dow from deep early lows

On Monday, the Dow Jones Industrial Average closed at 25,763.16, up 157.62 points from Friday’s close of 25,605.54. Stocks erased early losses on the Federal Reserve’s announcement that it will buy individual corporate bonds, strengthening its support for credit markets during the coronavirus pandemic.

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Fears of Covid-19 accelerating domestically and internationally pressured stocks during the morning, with the Dow plunging over 730 points to an intraday low below 25,000. Further, Spartan Capital Securities chief market economist Peter Cardillo said that there was “over-exuberance” in the market according to CNBC sources.

Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator, which captures the ratio of total market cap to gross domestic product, stood at 144.9% as of the close.

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To combat the volatile market swings, investors can seek opportunities in predictable companies that are trading no higher than 30% of the company’s 10-year low price-sales ratio. A backtest study on the GuruFocus business predictability rank revealed that stocks with a predictability rank of at least four stars averaged an annualized return of over 11% during the 10-year period from 2009 to 2019, outperforming the annualized return of between 4% and 9% for stocks with a predictability rank of less than three stars.

FirstCash

Shares of FirstCash are trading around 16% above the 52-week low. The company’s price-sales ratio of 1.59 is approximately 19% above the 10-year low of 1.33.

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The Fort Worth, Texas-based company offers pawn loans where the borrower can repay the loans with interest or forfeit the property secured on the loan with no further penalty. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include a return on assets that outperforms 87.08% of global competitors and a 4.5-star predictability rank.

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Omnicom Group

Shares of Omnicom Group are trading around 21% above the 52-week low. The company’s price-sales ratio of 0.81 is approximately 10.95% above the 10-year low of 0.73, contributing to a high valuation rank of 8.

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The New York-based company provides services for digital advertising and public services around the globe. GuruFocus ranks Omnicom’s profitability 8 out of 10 on several positive investing signs, which include expanding operating margins and a return on assets that outperforms over 77% of global competitors.

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Gurus with large holdings in Omnicom include First Eagle Investment (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).

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CVS

Shares of CVS are trading around 22% above the 52-week low. The company’s price-sales ratio of 0.31 is approximately 10.71% above the 10-year low of 0.28 and outperforms 84.21% of global competitors.

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GuruFocus ranks CVS’s valuation 10 out of 10 on the back of price valuations near 10-year lows and outperforming over 84% of global competitors. Other positive investing signs include a high Piotroski F-score of 7 and a five-star business predictability rank.

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Gurus with large holdings in CVS include Dodge & Cox and Barrow, Hanley, Mewhinney & Strauss.

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J2 Global

Shares of J2 Global are trading around 27% above the 52-week low. The company’s price-sales ratio of 2.56 is approximately 14.79% above the 10-year low of 2.23.

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The Los Angeles-based company provides a wide range of Internet services across two business segments: business cloud services and digital media services. GuruFocus ranks J2 Global’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank, a high Piotroski F-score of 7 and an operating margin that outperforms 89.12% of global competitors despite contracting approximately 9% per year on average over the past five years.

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United Parcel Service

Shares of United Parcel Service are trading around 28% above the 52-week low. The company’s price-sales ratio of 1.24 is approximately 21.57% above the 10-year low.

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Disclosure: Long J2 Global.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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pjmason14Momentum
pascal.van.garsseHigh FCF-M2
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DBrizanall 2019Feb26
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