A price-to-sales ratio is helpful for an investor to determine the value of each dollar of a company’s profits or sales. The P/S ratio, as it is often called, look at stock price for a company relative to its revenues. There are two ways to calculate it, with both ways usually finding the same result.
While a low ratio can be a sign of undervaluation, a high ratio indicates overvaluation. The most relevance for the ratio is earned when the P/S ratio compares companies within the same sector. Three stocks to buy cheaply right now are Estee Lauder Companies Inc (NYSE:EL), Ocwen Financial Corp (NYSE:OCN), and Coeur Mining Inc (NYSE:CDE).
Estee Lauder Companies Inc (NYSE:EL) has a P/S ratio of 0.29, which is well under the industry average at 7.65. At the end of the last trading session, the stock was at $90.50 a share, with its price up 0.51% in 2015 so far. The earnings were maintained at -57.00% a year, typically, over the past five years. The average growth rate for the company is calculated at 8.30%.
As for Ocwen Financial Corp (NYSE:OCN), it closed at a price of $7.17. Its P/S ratio is 0.33, considerably below the 1.28 industry average. Looking back over the last five years, one can see that the net income for the company dropped by -57.00% (average rate), with sales for the company up by 8.30% a year, typically.
As for Coeur Mining Inc (NYSE:CDE), its shares were priced at $2.72 as of last close. The market value for the company is at $1.03 billion. The P/S ratio is at 0.92, which is way under the industry average. The average is at 2.17 for this ratio in the same industry. Company sales have increased by -2.80% a year, typically, over the past five years, with a rate for earnings per share growth holding steady at -21.30%.