4 Bargain Price-to-Sales Stocks That May Outperform the Market

Investing in stocks based on valuation metrics is a proven strategy for identifying opportunities with strong upside potential. While the price-to-earnings (P/E) ratio is a popular tool for gauging value, it has its limitations, especially when evaluating companies that are unprofitable or still in their early growth phases.

In such cases, the price-to-sales (P/S) ratio becomes particularly valuable. By comparing a company’s market capitalization to its revenues, the P/S ratio offers a clearer picture of value when earnings are minimal or volatile.

If you are looking for growth at a discount, low P/S stocks can offer compelling opportunities. These stocks often trade below their intrinsic value, making them attractive to investors seeking upside potential without paying a premium. While the P/S ratio alone does not guarantee success, when combined with strong fundamentals and positive business momentum, it can signal a stock poised for a breakout.

Consolidated Edison ED, PCB Bancorp PCB, Apple Hospitality REIT, Inc. APLE and Peapack-Gladstone Financial Corporation PGC are some companies with low price-to-sales ratios and the potential to offer higher returns.

What Is 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 ratio 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 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 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. 

Screening Parameters

Price-to-Sales less than the Median Price-to-Sales for its Industry: The lower the price-to-sales ratio, the better.

Price-to-Earnings using F(1) estimate less than the Median Price-to-Earnings for its Industry: The lower, the better.

Price-to-Book (Common Equity) less than the Median Price-to-Book for its Industry: This is another parameter to ensure the value feature of a stock.

Debt-to-Equity (Most Recent) less than the Median Debt-to-Equity for its Industry: A company with less debt should have a stable price-to-sales ratio.

Current Price greater than or equal to $5: The stocks must be trading at a minimum of $5 or higher.

Zacks Rank less than or equal to #2 (Buy): Zacks Rank #1 (Strong Buy) or #2 stocks are known to outperform, irrespective of the market environment.

Value Score less than or equal to B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best opportunities in the value investing space.

Here are four of the 12 stocks that qualified the screening:

Consolidated Edison is a diversified utility holding company engaged in both regulated and unregulated businesses. The company follows a systematic investment plan for infrastructure development and maintains the reliability of its electric, gas and steam delivery systems. It aims to invest $38 billion in infrastructure and maintain the reliability of its electric, gas and steam delivery systems in the next five years. The company also plans to promote the efficient operation of 1,000 MW of energy storage by 2030.

With industries across the board rapidly adopting clean energy as their preferred choice of energy source, utility providers like Consolidated Edison are expanding their renewable energy portfolio to earn the economic and environmental, social and governance incentives offered by the utility-scale renewable energy market. ED currently has a Zacks Rank #2 and a Value Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Los Angeles-based PCB Bancorp serves as the holding company for PCB Bank, offering a range of banking products and services tailored to small and medium-sized businesses, individuals and professionals in Southern California. Its offerings include demand deposits, savings accounts, money market accounts, time deposits and certificates of deposit.

PCB Bancorp also provides specialized services, such as trade finance, remote deposit capture, courier deposit services, positive pay, zero-balance accounts and sweep accounts. The company’s strategic expansion and branch network optimization position it for sustained balance sheet growth and strong financial performance. PCB has a Value Score of A and a Zacks Rank #2 at present.

Apple Hospitality is a publicly traded real estate investment trust that owns the largest and most diverse portfolio of upscale, rooms-focused hotels in the United States. The company offers a fundamentally sound lodging REIT story built on portfolio quality, brand alignment and disciplined execution. The company owns a geographically diversified collection of room-focused hotels affiliated with leading brands, giving it broad exposure to leisure, corporate and group demand.

Management has demonstrated prudent capital allocation through selective acquisitions, timely dispositions and consistent reinvestment to keep properties competitive. A flexible balance sheet and ample liquidity provide resilience across cycles. While recent demand softness weighed on performance, leisure trends remain supportive and operational agility positions the portfolio to benefit as business travel normalizes, supporting long-term cash flow stability and shareholder returns. APLE has a Value Score of A and a Zacks Rank #2 at present.

Peapack-Gladstone offers a differentiated community banking story anchored in private banking and wealth management. The company continues to generate steady earnings growth, driven by strong core deposit gathering, disciplined loan underwriting and consistent net interest margin expansion. Its private banking model is attracting relationship-based, lower-cost funding, improving operating leverage and reducing the reliance on wholesale sources. 

A growing wealth management franchise provides stable, recurring fee income and deepens client relationships. Asset quality trends are stabilizing as management proactively resolves problem credits. With solid capital levels and an expanding presence in metro New York, PGC is positioned for durable, relationship-driven growth. PGC currently has a Value Score of A and a Zacks Rank #2.

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This article originally published on Zacks Investment Research (zacks.com).

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