At this time in the market there is no shortage of stocks selling at low multiples of their fundamentals. There is blood in the streets, specially among the small and mid caps, and of course the value assets have suffered in the last couple of years. This makes low P/E stocks even more enticing from valuation perspective. Investors who scare easily have had many months to make their exits and no one wants to take risks anymore – perfect time for value investors to start buying the right stocks.

The following screen is quite simple. I have searched for stocks that not only have a low P/E ratio, but they also have high expected earnings growth in the next 3-5 years. Earnings estimates are normally not worth paying attention to, except as an indication from the management about the direction of the growth (most analysts take management guidance as their basis for future projections).

Industry: Airlines

Airlines are a very commodity business with cut throat competition. Current low oil prices have helped airlines on the cost side of the ledger, and as a result many of these stocks now show improved earnings. However, investors are not willing to pay up for these improved earnings as they are not result of any fundamental change in the business model, just a temporary boost that will go away when the oil prices return to higher levels. Virgin America, in the list below, is also particularly cash rich.

SYMBOL COMPANY NAME INDUSTRY PRICE MARKET CAP P/E (TTM) FORWARD EPS GROWTH (3-5 YRS) DAL Delta Air Lines Inc. Airlines $44.58 $33.5B 7.9 23.15% VA Virgin America Inc Regional Airlines $29.29 $1.2B 8.5 33.13%

Industry: Construction and Building Materials

Most construction companies can be purchased today at prices below the book value per share of the company. The following companies also trade at low p/e and this makes them potentially very attractive investments. USG stock has been a perennial Warren Buffett favorite.

Print Friendly, PDF & Email

Related Posts