02/04/2020

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3 Five-Star Companies at Historically Low Price-Sales Ratios

In light of ongoing coronavirus fears, three stocks that have a five-star GuruFocus business predictability...

In light of ongoing coronavirus fears, three stocks that have a five-star GuruFocus business predictability rank and are trading near historically low price-sales ratios are Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH), Hyatt Hotels Corp. (NYSE:H) and BJ’s Restaurants Inc. (NASDAQ:BJRI).

The Historical Low Price-Sales Screener, one of our Premium value screens, identifies the companies that not only are trading at price-sales ratios less than 30% of the historical low, but also have strong and consistent revenue and earnings growth, a key investing criteria according to Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio). Gurus like Arnold Van Den Berg (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) incorporate the low price-sales strategy into their investing.

Dow ends wild week with a small loss, yet finishes up for the week

On Friday, the Dow Jones Industrial Average closed at 25,864.78, down 256.50 points from Thursday’s close of 26,121.28, yet 455.42 points higher than last Friday’s close of 25,409.36.

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The Bureau of Labor Statistics reported that the U.S. added 273,000 jobs during the month of February, smashing the Dow Jones estimate of 175,000 new jobs. The unemployment rate for February stood at 3.5%, matching the lowest level for nearly 50 years.

Despite the strong jobs report, investors still viewed the ongoing coronavirus outbreak with trepidation, seeking safer investments like Treasuries and gold. The 10-year Treasury yield dropped below 1%, near an all-time low.

The Dow’s small loss on Friday completed a wild week for the U.S. market, which saw two four-digit gains and two losses of at least 800 points. The week follows a gruesome final week of February, where the Dow tumbled over 12%. As such, investors might find opportunities in predictable companies that are now trading near historical low price-sales ratios.

Norwegian

Norwegian’s price-sales ratio of 0.93 is 1% above the 10-year low of 0.92.

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According to Reuters, U.S. government officials are considering ways to discourage cruise travel as part of the Trump administration’s efforts to limit the spread of the coronavirus in the U.S. Reuters added that Carnival Corp.’s (NYSE:CCL) Grand Princess was barred from returning to San Francisco after at least 20 people on board showed signs of illness.

GuruFocus ranks Norwegian’s profitability 9 out of 10 on several positive investing signs, which include expanding operating margins and a return on equity that outperforms 81.24% of global travel and leisure competitors.

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Gurus with large holdings in Norwegian include PRIMECAP Management (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

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Hyatt

Hyatt’s price-sales ratio of 1.45 is approximately 17.88% higher than the 10-year low of 1.23.

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GuruFocus ranks the Chicago-based hotel operator’s profitability and valuation 8 out of 10 on several positive investing signs, which include a return on assets that outperforms 87% of global competitors, a price-earnings ratio near a 10-year low and a price-book and price-sales ratio both near a three-year low.

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Ron Baron (Trades, Portfolio) has the largest holding in Hyatt with over 4 million shares.

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BJ’s

BJ’s’ price-sales ratio of 0.50 is approximately 4.17% higher than the 10-year low of 0.48.

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GuruFocus ranks the Huntington Beach, California-based restaurant chain’s profitability 9 out of 10 and valuation 10 out of 10 on several positive investing signs, which include a three-year revenue growth rate that outperforms 75% of global competitors and price valuations that are near a 10-year low and outperform over 70% of global restaurants.

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Disclosure: No positions.

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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!

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