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Saturday, March 10, 2007

Atmospheric Price Sales Ratios

Short sellers are always looking for stocks that have a large market capitalization, no earnings, and either no or very low sales. The price/sales ratio measures the price of the stock based on its revenues. It is calculated on a per share basis by dividing the share price by the sales per share. A P/S below 1 is excellent. Depending on the type of company, a P/S of 1 to 2 is reasonable. A P/S of over 5 is usually unfavorable and means that the stock is very overpriced based in its sales.

Here are five stocks which have market caps of over $500 million, negative earnings, and very low revenues [and therefore extremely high P/S ratios]. Four out of five are biotech companies, so even with bad financials, they can still spike up from successful clinical trials and new drug approvals. Caution for potential short sellers: Just because a stock is over-priced, doesn't mean the stock can't become more overpriced.

Halozyme Therapeutics Inc. (HTI) P/S 907
MannKind Corp. (MNKD) P/S 11,429
Medis Technologies Ltd. (MDTL) P/S 943
Miramar Mining Corp. (MNG) P/S 2734
Onyx Pharmaceuticals Inc. (ONXX) P/E 4772

You can track these stocks at stockpickr.com.

Author does not own or short any of the above.

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