Searching for cheap stocks with good value characteristics and future prospects can be at the current market environment hard. Average earnings multiples are very high, drived by the expectations of strong future growth. But, this economic boom will not last forever (and thanks to Trump’s tariffs might economic downturn happen very soon), which will result in not-fulfilled expectations of growth and therefore decrease of asset prices.
Still, we can find plentiful stocks that are still trading relatively cheap based on price-to-earnings and other common ratios. But the fact the company is cheap does not mean that one should go and buy it just because of that. It can usually be a result of downgraded potential growth of the company and higher associated risk.
That is why we have created a list of 20 companies with cheap valuations but at the same time with stable past and future growth of sales and earnings per share, and profitability.
To get this list, we used screener at Finviz.com, and the criteria we applied are as follows:
- P/E ratio: Under 15
- PEG ratio: Under 2
- Share price: Over 5 USD
- Market Cap: Over USD 300 million
- Return on Equity: Over 5%
- Return on Investments: Over 5%
- Return on Assets: Positive
- Gross Margin: Over 10%
- Operating & Net Margin: Positive
- EPS growth Q-over-Q & this year: Positive
- EPS growth for past 5 and (expected) next 1 and 5 years: Over 5%
- Sales growth past 5 years: Over 5%
- Sales growth Q-over-Q: Positive
- Debt/Equity: Under 1
- Current Ratio: Over 1
This is just a sample of criteria that may be applied, there are countless combinations of other criteria that can be used to search for suitable companies. These criteria however say that the company is priced relatively well, is profitable, its sales and EPS have risen for the past 5 years and its EPS is expected to rise even further. Moreover, these companies are bringing positive returns to investors, have gross margins of over 10% and positive operating and net profit margin. And last but not least, the companies have more equity than debt and larger current assets than current liabilities.
The list of companies fulfilling these criteria comprise of:
|Johnson Controls International plc||Consumer Goods||Auto Parts||32.16B||14.11||34.64|
|DXC Technology Company||Technology||Information Technology Services||23.86B||13.28||83.55|
|Lear Corporation||Consumer Goods||Auto Parts||13.05B||10.58||187.39|
|Arrow Electronics, Inc.||Services||Electronics Wholesale||6.76B||12.48||77.06|
|Gentex Corporation||Consumer Goods||Auto Parts||6.40B||14.43||23.26|
|MKS Instruments, Inc.||Technology||Scientific & Technical Instruments||5.30B||13.53||97.30|
|Thor Industries, Inc.||Consumer Goods||Recreational Vehicles||5.18B||10.84||99.09|
|Deluxe Corporation||Services||Business Services||3.17B||12.42||65.96|
|Advanced Energy Industries, Inc.||Technology||Diversified Electronics||2.42B||11.05||61.16|
|United Natural Foods, Inc.||Services||Food Wholesale||2.20B||14.39||42.70|
|Amkor Technology, Inc.||Technology||Semiconductor – Integrated Circuits||2.11B||8.83||8.79|
|Methode Electronics, Inc.||Technology||Diversified Electronics||1.52B||13.77||40.80|
|Winnebago Industries, Inc.||Consumer Goods||Recreational Vehicles||1.33B||13.47||42.00|
|TPI Composites, Inc.||Industrial Goods||Diversified Machinery||1.02B||8.52||29.94|
|Malibu Boats, Inc.||Consumer Goods||Recreational Goods, Other||872.81M||11.97||42.89|
|SMART Global Holdings, Inc.||Technology||Semiconductor- Memory Chips||687.06M||9.62||31.23|
|Axcelis Technologies, Inc.||Technology||Semiconductor Equipment & Materials||681.81M||5.90||21.05|
|Ultra Clean Holdings, Inc.||Technology||Semiconductor Equipment & Materials||609.83M||7.05||16.38|
|Electro Scientific Industries, Inc.||Technology||Semiconductor – Integrated Circuits||565.06M||4.94||16.03|
|Cross Country Healthcare, Inc.||Services||Staffing & Outsourcing Services||451.99M||8.93||12.16|
These companies surely need a thorough analysis regarding their suitability as an investment and more deep look into their businesses and markets, but it is a good showcase that even at currently highly priced markets there are still lots of cheaply priced possible investment opportunities.
Feel free to share your ideas about cheap stocks and criteria to find them in comment below!