These past few weeks, the market's been on a roll, with stocks in a number of sectors seeing upward momentum. Great news for the investors already holding onto these soaring stocks, but what about everyone else? Tough call -- fortunately, there are a couple of key data points that may help you find rallying stocks with attractive valuations.
Take a look at a company's price-to-book ratio (P/B), which compares its price-per-share to its book value, or assets minus intangible assets and liabilities. When a stock's P/B is lower than the industry average, it's one indication that the company could be undervalued.
Also worth checking out is a company's price-to-sales ratio (P/S), which looks at market capitalization (the number of shares multiplied by the share price) and compares it to the company's total sales over the trailing 12 months. It's a useful piece of investment criteria, because it shows how much Wall Street values every dollar of the company's sales. A P/S below the industry average indicates that the company is trading at a discount relative to sales.
Before you jump on the bandwagon, check out our list of rising stocks with attractive valuation ratios. Think there's upside potential in these investments, or is there a good reason why these stocks are trading at depressed prices? (Click here to access free interactive tools to analyze these ideas.)
|
Performance Over Last Year |
P/S Valuation |
P/B Valuation | |
|---|---|---|---|
| MedQuist (Nasdaq: MEDQ) |
120.79% | 0.95 vs. industry avg. of 3.9 | 2.49 vs. industry avg. of 4.26 |
| The Greenbrier Companies (NYSE: GBX) |
70.10% | 0.5 vs. industry avg. of 2.18 | 1.47 vs. industry avg. of 1.91 |
| American Railcar Industries (Nasdaq: ARII) |
58.21% | 1.35 vs. industry avg. of 2.18 | 1.13 vs. industry avg. of 1.91 |
| T-3 Energy Services (Nasdaq: TTES) |
55.97% | 2.23 vs. industry avg. of 2.76 | 1.72 vs. industry avg. of 1.79 |
| Xyratex (Nasdaq: XRTX) |
38.69% | 0.34 vs. industry avg. of 0.67 | 1.46 vs. industry avg. of 2.21 |
| Epicor Software (Nasdaq: EPIC) |
37.67% | 1.44 vs. industry avg. of 3.9 | 2.0 vs. industry avg. of 4.26 |
| Zhongpin (Nasdaq: HOGS) |
29.13% | 0.84 vs. industry avg. of 1.14 | 2.13 vs. industry avg. of 4.98 |
| Photronics (Nasdaq: PLAB) |
27.58% | 0.82 vs. industry avg. of 1.06 | 0.80 vs. industry avg. of 1.73 |
Valuation data sourced from Reuters. The list has been sorted by performance over the last year.
Interactive Chart: Press Play to see how the market caps of all these stocks have changed over the last two years.
Kapitall's Eben Esterhuizen and Alicia Sellitti don't own shares of any companies mentioned.
