Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Fundamental Analysis: P/S - I Love You (Sometimes)
Date: Thu, 27 Mar 2003 13:04:21 -0500
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Hi Gene,
I agree, the p/s ratio is hard to fudge, but even it can be adulterated =
by crafty business managers (e.g. booking a sale that won't be delivered =
until the next quarter, or even fiscal year, same stunt many have pulled =
on earnings). My best guide still remains the "trend" of earnings, =
sales, and the ratio between them, on a sequential quarterly basis. =
While that doesn't guarantee any fudging, it at least means they are =
more likely consistent in their fudging :))
I have seen (unfortunately even owned) companies that included sales for =
merchandise that was still sitting on their loading dock, waiting to be =
put on the truck and delivered, as of the end of the quarter.
I went thru a period in one of my prior lives, before I was introduced =
to CANSLIM, where I totally focused on fallen angels. I will still =
occasionally consider a particularly attractive candidate, but usually =
just for purposes of putting it on a watch list for further research, =
observation of how it trades, etc. If I am going to tie up capital in a =
stock moving sideways, I prefer it already be at a 12 month high, so at =
least I don't have to overcome the overhead resistance.
- ----- Original Message -----=20
From: Gene Ricci=20
To: canslim@lists.xmission.com=20
Sent: Thursday, March 27, 2003 12:43 PM
Subject: Re: [CANSLIM] Fundamental Analysis: P/S - I Love You =
(Sometimes)
Thanks Tom!
I might be all wet but I feel that companies will have a hard time =
fudging this ratio. They can fudge EPS lots of different ways, but =
there are few ways to fudge sales. There are some (particularly =
software companies) that have in the past. Some used to book the entire =
amount of a contract sales when it was signed, rather than book when it =
was billed. But this practice has been under fire and is likely to go =
away if it hasn't already.=20
Do you not look at fallen angels? If you do, what would your criteria =
be?
Thanks,
Gene
----- Original Message -----=20
From: Tom Worley=20
To: canslim@lists.xmission.com=20
Sent: Thursday, March 27, 2003 9:35 AM
Subject: Re: [CANSLIM] Fundamental Analysis: P/S - I Love You =
(Sometimes)
Gene, a p/s ratio of 1.0 or less is fine if you are looking for fallen =
angels, bottom fishing, value shopping, etc. But I don't see what that =
has to do with CANSLIM
Because expectations drive price, and thus high expectations would =
create a high p/s ratio, I am automatically suspicious whenever I find a =
stock hitting new highs, with great CANSLIM fundamentals, but a =
relatively low p/s ratio (generally under 2.0). It forces me to dig =
deeper to figure out why the price does not already reflect a higher =
premium.
----- Original Message -----=20
From: Gene Ricci=20
To: canslim@lists.xmission.com=20
Sent: Wednesday, March 26, 2003 8:50 PM
Subject: [CANSLIM] Fundamental Analysis: P/S - I Love You (Sometimes)
Appreciate comments on this article.
Gene
Fundamental Analysis: P/S - I Love You (Sometimes)
------------------------------------------------------------
Investors are always seeking ways to compare the value of stocks.=20
The price-to-sales ratio provides a simple approach: take the=20
company's market capitalization (the number of shares multiplied=20
by the share price) and divide it by the company's total sales=20
over the past twelve months. The lower the ratio, the more attractive=20
the investment. As easy as it sounds, price-to-sales provides=20
a useful measure for sizing up stocks. But investors need to=20
be mindful of the ratio's potential pitfalls and possible=20
unreliability.=20
Read this article at:
http://www.investopedia.com/articles/fundamental/03/032603.asp
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<DIV><FONT face=3DArial>Hi Gene,</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>I agree, the p/s ratio is hard to fudge, but =
even it can=20
be adulterated by crafty business managers (e.g. booking a sale that =
won't be=20
delivered until the next quarter, or even fiscal year, same stunt many =
have=20
pulled on earnings). My best guide still remains the "trend" of =
earnings, sales,=20
and the ratio between them, on a sequential quarterly basis. While that =
doesn't=20
guarantee any fudging, it at least means they are more likely consistent =
in=20
their fudging :))</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>I have seen (unfortunately even owned) companies =
that=20
included sales for merchandise that was still sitting on their loading =
dock,=20
waiting to be put on the truck and delivered, as of the end of the=20
quarter.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>I went thru a period in one of my prior lives, =
before I=20
was introduced to CANSLIM, where I totally focused on fallen angels. I =
will=20
still occasionally consider a particularly attractive candidate, but =
usually=20
just for purposes of putting it on a watch list for further research,=20
observation of how it trades, etc. If I am going to tie up capital in a =
stock=20
moving sideways, I prefer it already be at a 12 month high, so at least =
I don't=20
have to overcome the overhead resistance.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV style=3D"FONT: 10pt arial">----- Original Message -----=20
<DIV style=3D"BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A=20
title=3Dgenr@swbell.net href=3D"mailto:genr@swbell.net">Gene Ricci</A> =
</DIV>
<DIV><B>To:</B> <A title=3Dcanslim@lists.xmission.com=20
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV><B>Sent:</B> Thursday, March 27, 2003 12:43 PM</DIV>
<DIV><B>Subject:</B> Re: [CANSLIM] Fundamental Analysis: P/S - I Love =
You=20
(Sometimes)</DIV></DIV>
<DIV><BR></DIV>
<DIV><FONT face=3D"Comic Sans MS">Thanks Tom!</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"></FONT> </DIV>
<DIV><FONT face=3D"Comic Sans MS"><FONT size=3D4>I might be all wet =
but I feel=20
that companies will have a hard time fudging this =
ratio. =20
They can fudge EPS lots of different ways, but there are few ways =
to fudge=20
sales. There are some (particularly software companies) that =
have in=20
the past. Some used to book the entire amount of a contract sales =
when it=20
was signed, rather than book when it was billed. But this practice =
has=20
been under fire and is likely to go away if it hasn't already.</FONT>=20
<DIV> </DIV></FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS">Do you not look at fallen angels? If =
you do,=20
what would your criteria be?</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"></FONT> </DIV>
<DIV><FONT face=3D"Comic Sans MS">Thanks,</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS">Gene</FONT></DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dstkguru@bellsouth.net =
href=3D"mailto:stkguru@bellsouth.net">Tom=20
Worley</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Thursday, March 27, 2003 =
9:35=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] =
Fundamental=20
Analysis: P/S - I Love You (Sometimes)</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial>Gene, a p/s ratio of 1.0 or less is fine if =
you are=20
looking for fallen angels, bottom fishing, value shopping, etc. But I =
don't=20
see what that has to do with CANSLIM</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Because expectations drive price, and thus =
high=20
expectations would create a high p/s ratio, I am automatically =
suspicious=20
whenever I find a stock hitting new highs, with great CANSLIM =
fundamentals,=20
but a relatively low p/s ratio (generally under 2.0). It forces me to =
dig=20
deeper to figure out why the price does not already reflect a higher=20
premium.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV style=3D"FONT: 10pt arial">----- Original Message -----=20
<DIV style=3D"BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A=20
title=3Dgenr@swbell.net href=3D"mailto:genr@swbell.net">Gene Ricci</A> =
</DIV>
<DIV><B>To:</B> <A title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV><B>Sent:</B> Wednesday, March 26, 2003 8:50 PM</DIV>
<DIV><B>Subject:</B> [CANSLIM] Fundamental Analysis: P/S - I Love You=20
(Sometimes)</DIV></DIV>
<DIV><BR></DIV>
<DIV><FONT face=3D"Comic Sans MS" size=3D4>Appreciate comments on this =
article.</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS" size=3D4></FONT> </DIV>
<DIV><FONT face=3D"Comic Sans MS" size=3D4>Gene</FONT></DIV>
<DIV style=3D"FONT: 10pt arial">
<DIV><FONT face=3D"Comic Sans MS" size=3D4></FONT> </DIV></DIV>
<DIV><BR></DIV>
<DIV>Fundamental Analysis: P/S - I Love You=20
=
(Sometimes)<BR>----------------------------------------------------------=
- --<BR>Investors=20
are always seeking ways to compare the value of stocks. <BR>The =
price-to-sales=20
ratio provides a simple approach: take the <BR>company's market =
capitalization=20
(the number of shares multiplied <BR>by the share price) and divide it =
by the=20
company's total sales <BR>over the past twelve months. The lower the =
ratio,=20
the more attractive <BR>the investment. As easy as it sounds, =
price-to-sales=20
provides <BR>a useful measure for sizing up stocks. But investors need =
to=20
<BR>be mindful of the ratio's potential pitfalls and possible=20
<BR>unreliability. <BR><BR>Read this article at:<BR><A=20
=
href=3D"http://www.investopedia.com/articles/fundamental/03/032603.asp">h=
ttp://www.investopedia.com/articles/fundamental/03/032603.asp</A><BR></DI=
V>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px"><FONT=20
face=3D"Comic Sans MS"=20
size=3D4></FONT> </BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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