The Biggest Loser

Loser of 03/05 – 03/09: Based on my in-depth research over the past week, I have come to the conclusion that L.S. Starrett Co. (NYSE: SCX) was by far the prevailing loser upon the closing of the stock markets for the weekend at 4:00PM Friday evening. 

Background: L.S. Starrett Co. is a manufacturer and distributor worldwide of precision saw blades, tools, measuring equipment, and gages for everyday consumers, professionals, and industrial purposes alike. It is managed under two separate geographical sectors: International Operations and North American Operations.

Justification: There are various distinctive key elements that affect my justification for naming L.S. Starrett as the New York Stock Exchange’s biggest loser of last week. Let’s check out three of the most essential and vital components behind my determination. Price to earnings ratio, otherwise known, as the PE Ratio is simply the amount of money an investor would need to invest in order to earn one dollar of the companies earnings. The PE Ratio at market closing on Friday, March 9th was 52 to 86, this is a pretty high ratio, which is an indicator that the stock is most likely over priced. Price to Sales Ratio, also known as PS Ratio, is the dollar value that is given to every dollar of their revenues. To put this into perspective, when comparing price to sales, a high ratio suggests there is a good chance of an elevated future growth curve. With this being said, the PS Ratio dropped dramatically in only one day, from 0.29 on Thursday March 8th to 0.25 on Friday March 9th. I believe this drop was largely an effect of their recent press release noting their decision to terminate 30 jobs and subsequently close their Mount Airy factory. Finally, Earnings Per Share, a.k.a. EPS is the portion of the companies profits that are assigned to each share of stock. The higher this number is, the more profitable the business is for its investors. L.S. Starret has an EPS is $-0.99, this is a huge red flag for any potential or current investors, for every share of the company they have lost $0.99. By having the earnings per share of stock in the negatives, this means that the company is generating fewer profits than the amount of money they are spending.

Conclusion: After evaluating and taking into consideration all of these factors, I came to the conclusion that L.S. Starrett was not only an overpriced stock due to their high price vs. low earnings, their abruptly decrease in cost per stock over a one day period, but also the earnings that each share produced being in the negative. It should also be taken into account the recent press release stating their intentions of closing a plant and dismissing 30 of their employees. These all indicate that L.S. Starrett is not a smart stock to be invested in by rookie or experienced alike.

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PE Ratio (Price to Earnings Ratio) – this ratio is an indication of the dollar amount that stockholders or investors would need to invest in that business in order to collect one dollar of their earnings. It is sometimes called the price multiple, since it demonstrates how much investors should be prepared to pay per dollar of earnings. This is calculated by subtracting the share value at the start of the 12-month period, from the value at the end of the 12 months, with adjustments made for stock splits.

PS Ratio (Price to Sales Ratio) – this ratio is a means of valuing the company’s stock prices in comparison to its revenues. Basically, it is the value that is given to every dollar that the business earns either through their revenue or sales. It’s calculated in two ways, per-share; dividing stock price by sales per share over a 12-month period or as a whole; dividing their market capitalization by the total soles over a 12-month period.

 

EPS (Earnings Per Share) – the fraction of a businesses revenue or profit that is assigned to each and every share of outstanding common stock. This is calculated by dividing average outstanding share from the total after dividends on preferred stock are subtracted from their net income.