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Zacks.com featured highlights G-III Apparel, JAKKS Pacific, Titan Machinery, Charles River and KB Home
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For Immediate Release

Chicago, IL – October 27, 2023 – Stocks in this week’s article are G-III Apparel, Ltd. GIII, JAKKS Pacific JAKK, Titan Machinery TITN, Charles River Associates CRAI and KB Home KBH.

5 Low Price-to-Sales Stocks That Promise Handsome Returns

Investment in stocks after analyzing the valuation metrics is considered one of the best practices. When considering the valuation metrics, the price-to-earnings ratio has always been the obvious choice. This is because calculations based on earnings are easy and come in handy. However, the price-to-sales ratio is convenient for determining the value of stocks that are incurring losses or in an early development cycle, generating meager or no profit.

What’s the Price-to-Sales Ratio?

While a loss-making company with a negative price-to-earnings ratio falls out of investor favor, its price-to-sales can indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure a company's growth is not overvalued.

A stock’s price-to-sales ratio reflects how much investors pay for each dollar of revenue generated by a company.

If the price-to-sales ratio is 1, investors are paying $1 for every $1 of revenues generated by the company. A stock with a price-to-sales below 1 is a good bargain as investors need to pay less than a dollar for a dollar’s worth.

Thus, a stock with a lower price-to-sales ratio is a more suitable investment than a stock with a high price-to-sales ratio.

The price-to-sales ratio is often preferred over price-to-earnings, as companies can manipulate their earnings using various accounting measures. However, sales are harder to manipulate and are relatively reliable.

However, one should keep in mind that a company with a high debt and a low price-to-sales ratio is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance, a rise in market cap, and, ultimately, a higher price-to-sales ratio.

In any case, the price-to-sales ratio used in isolation cannot do the trick. One should analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision.

G-III Apparel, Ltd., JAKKS Pacific, Titan Machinery, Charles River Associates and KB Home are some companies with a low price-to-sales ratio and the potential to offer higher returns.

Here are five of the 16 stocks that qualified for the screening:

G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private-label brands. The company’s portfolio includes outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, and women’s handbags, footwear, small leather goods, cold weather accessories and luggage.

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