The following metric blew my mind.
YRC Worldwide (Nasdaq: YRCW), the Fortune 500 trucker, sells for a price-to-sales ratio (P/S) of just 0.06. In other words, investors are willing to spend just six cents for every dollar of revenue YRC Worldwide brings in. By comparison, Apple stock sells for a P/S of 3.85.
Clearly, investors don't have much faith in YRC's ability to convert sales to profits. Of course, even during good times, YRC doesn't trade for anywhere near sales. That's because the nature of the trucking industry is that profit margins can't come close to those of a company like Apple.
That said, there are other reasons YRC is trading for such a low multiple. It hasn't turned a full year's worth of profit since 2006 and it faces real bankruptcy risk. For those with the ability and the cast-iron stomach to vet YRC's prospects, there may be opportunity here. But click here to be warned.
YRC and the Great 8
YRC's headline number of 0.06 times sales made me curious to know what companies, if any, have a lower P/S. Limiting the search to stocks that have market capitalizations above $200 million, I found just eight:
|
Company Name |
Market Capitalization (in millions) |
P/ S (TTM) |
P/E (TTM) |
Dividend Yield |
|---|---|---|---|---|
|
YRC Worldwide |
$307 |
0.06 |
NM |
- |
|
Global Partners LP (NYSE: GLP) |
$413 |
0.06 |
12.8 |
8.0% |
|
Winn-Dixie Stores (Nasdaq: WINN) |
$447 |
0.06 |
18.4 |
- |
|
Susser (Nasdaq: SUSS) |
$203 |
0.05 |
NM |
- |
|
SUPERVALU (NYSE: SVU) |
$2,126 |
0.05 |
6.1 |
3.5% |
|
Core-Mark |
$281 |
0.05 |
10.5 |
- |
|
Western Refining (NYSE: WNR) |
$366 |
0.05 |
NM |
- |
|
Rite Aid (NYSE: RAD) |
$789 |
0.03 |
NM |
- |
|
International Assets Holding Corp. |
$288 |
0.01 |
20.4 |
- |
Source: Capital IQ, a division of Standard & Poor's.
I included P/E ratios to see if any of these companies were able to convert sales to earnings.
Three, like YRC Worldwide, have negative earnings -- drug store chain Rite Aid, convenience store operator Susser, and oil refiner Western Refining. These three also have ugly, debt-laden balance sheets.
The profitable companies may provide us more bang for our buck.
In the market/pharmacy retailing space, Winn-Dixie and SUPERVALU offer profitable alternatives to Rite Aid and Susser. SUPERVALU comes with a trailing P/E ratio of just 6.1 and a dividend yield of 3.5%.
Over on the petroleum side, distributor Global Partners is not only profitable, but offers up an 8.0% yield. Of course, on a trailing basis, it's paid out nearly all its earnings as dividends.
I offer up each of these companies not as recommendations, but as ideas for research. Like YRC Worldwide, many of these companies operate in industries with traditionally low margins, resulting in low price-to-sales ratios. Still, these price-to-sales ratios are tiny and worth investigating if you're looking for beaten-down stocks or turnaround situations.
I recently wrote about two other left-for-dead situations. Click here to read about them.
