Compared with an all domestic stocks index mutual fund average annual return of about 11%, a low PSR by itself can be valuable to use in stock selection, providing average annual returns of around 16%, according to What Works On Wall Street by James P. O'Shaughnessy (p.136, McGraw-Hill, New York, 1997). He considered it the best single stock value measure. Low P/S was defined as the 50 stocks with the lowest PSR from an all domestic stock universe, starting on the last day of 1951 and continuing through the last day of 1994, rebalanced annually to assure inclusion of the lowest 50 by P/S each year.
Yet a stock need not be selected based on price-to-sales alone. It can be the foundation of an overall value approach and provide even better average results. I favor this latter method and give particular emphases to P/S of 0.5 or below, debt to equity of 0.99 or below, reasonable return on equity, price to earnings, and price to book value ratios, and positive price momentum.
The following stocks meet this overall set of criteria.