Buying stocks based on historical low price-to-sales (P/S) ratios has been shown to be an effective investment strategy. At GuruFocus, our “Top 25 Historical Low P/S Ratio Companies” portfolio has outperformed the S&P 500 by 23.38 percent since its inception in 2010. Our portfolio is rebalanced once a year and can be viewed at GuruFocus.com. Below is the latest list of stocks that are trading near historical low P/S ratios and are widely held by the investing gurus we follow:
Qualcomm Inc (QCOM, Financial) is trading at a low P/S ratio of 4.80, near its 10-year low of 4.48. The company continues to lead the development and commercialization of a digital communication technology called CDMA, and owns significant intellectual property applicable to products that implement any version of CDMA including patents, patent applications and trade secrets. Its technology is most commonly known as being used in Sprint, Verizon, and U.S Cellular phones. The 10-year median P/S ratio for Qualcomm is 7.06. The stock would be priced at $107.67 if trading at a similar ratio today. The stock is underpriced since revenue per share for the past 12 months has grown 15.2 percent, similar to its 10-year annualized rate of 17.6 percent. Margins have also been steady. The stock is held by 29 gurus we follow with PRIMECAP Management (Trades, Portfolio) holding the largest position of 18.8 million shares, representing 1.12 percent of the shares outstanding.
Owens & Minor Inc (OMI, Financial) is trading at a low P/S ratio of 0.20, near its 10-year low of 0.18. The company is a leading healthcare logistics company that connects the world of medical products to the point of care. The 10-year median P/S ratio for Owens & Minor is 0.23. The stock would be priced at 33.49 if trading at a similar ratio today. The stock is not as undervalued as it appears. Revenue per share has only been growing at a rate of 2.10 percent for the past 12 months compared to 7.8 percent for its 10-year annualized average. Net margins have been on a negative trend, decreasing 2.25 percent per year over the past five years. The stock is held by nine gurus we follow, with the Vanguard Healthcare Fund holding the largest position of 3 million shares, representing 4.76 percent of the shares outstanding.
NeuStar Inc (NSR, Financial) is trading at a low P/S ratio of 1.70, near its 10-year low of 1.65. The company is a neutral and trusted provider of real-time information services and analytics, using authoritative and proprietary analytics to help its clients promote and protect their businesses. The 10-year median P/S ratio for NeuStar is 3.72. The stock would be priced at $54.91 if trading at a similar ratio today. The stock is not a bargain as indicated by its low P/S ratio. The low price is due to the company losing out on renewing a major contract with the government. The contract accounted for nearly half of its revenue in 2013. NeuStar has the other half of its business left that it can grow. The stock is held by eight gurus we follow with PRIMECAP Management (Trades, Portfolio) holding the largest position of 3.74 million shares, representing 6.22 percent of the shares outstanding.
Outerwall Inc (OUTR, Financial) is trading at a low P/S ratio of 0.57, near its 10-year low of 0.57. The company is a leading provider of automated retail solutions that offer convenient products and services that benefit consumers and drive incremental retail traffic and revenue for retailers. The company is most commonly known for its Redbox machines. The 10-year median P/S ratio for Outerwall is 1.13. The stock would be priced at $105.82 if trading at a similar ratio today. The stock looks to be undervalued with revenue growing at 26.2 percent over the past 12 months, higher than its 10-year annualized average of 22.4 percent. Net margins are also stable. The stigma of dealing with DVD rentals is likely holding down the price of the stock with investors worried about where the company will go next. For now, Outerwall is performing very well. The stock is held by eight gurus we follow with Ken Fisher (Trades, Portfolio) of Fisher Asset Management holding the largest position of 1.21 million shares, representing 5.93 percent of the shares outstanding.
PetroChina Co Ltd (PTR, Financial) is trading a low P/S ratio of 0.60, near its 10-year low of 0.59. The company produces oil and gas in China and operates in four segments: Exploration and Production, Refining and Chemicals, Marketing, and Natural Gas and Pipeline. The 10-year median P/S ratio for PetroChina is 1.31. The stock would be trading at $269.28 if trading at a similar ratio today. This stock is not as much of a bargain as the low P/S ratio indicates. Revenue only grew 2.90 percent over the past 12 months compared with its 10-year annualized average of 21.10 percent growth. Net margins have been declining at a high annual rate of 15.94 over the past five years. The stock is held by seven gurus we follow with Ray Dalio (Trades, Portfolio) of Bridgewater Associates holding the largest position of 39.597 shares.
For the complete list of GuruFocus list of companies that are traded at historical low P/S ratios, go to: GuruFocus Value Strategies of Historical Low P/S Ratios.
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