10 Stocks With Low P/E Ratios | Bankrate (2024)

Investors are often drawn to high-growth companies with ambitious plans for the future. The challenge for investors is that these companies often trade at high valuations, which means you’re paying a lot for future growth that may or may not come to fruition. But many of the world’s most successful investors have earned attractive returns by focusing on companies that are attractively priced, which often means their stocks have low price-earnings ratios.

Here are 10 companies that sell for single-digit P/E ratios and what that metric means for investors.

What is a P/E ratio and what does it mean?

The P/E ratio is a valuation metric used by investors to compare a stock’s price with its earnings per share. It’s a way to see how much you’re paying compared to how much you’re getting in earnings. The ratio is calculated by dividing a stock’s share price by its per share earnings. Analysts use both trailing earnings, or earnings over the previous year, as well as forward earnings, which are projections of what the company will earn over the next year, in the calculation.

The level of a stock’s P/E ratio is impacted by a number of factors, but some major factors include interest rates, the company’s future growth rate and the market’s confidence in that growth. Investors are often willing to pay high multiples of a company’s earnings if they’re confident earnings will grow significantly over time. Lower growth companies typically trade for lower P/E ratios.

However, a low P/E ratio doesn’t necessarily mean that the company won’t grow in the future. Companies with low P/E ratios often face some short-term uncertainty about their earnings such as a possible recession or company specific challenge. Warren Buffett and other investors have made a fortune investing in cheap stocks that are temporarily misunderstood by the market, often benefitting as a company’s earnings outperform expectations and the P/E ratio rises along with earnings.

Stocks with single-digit P/E ratios

*Data below as of June 22, 2023. Source: TIKR Terminal and Yahoo! Finance

1. United Airlines (UAL)

United Airlines is one of the largest airline companies in the U.S. and operates major hubs in Chicago, Denver, Houston, Los Angeles, New York, San Francisco and Washington, D.C. United reported nearly $45 billion in revenue in 2022, but the airline industry is cyclical and recession concerns could be weighing on the stock.

Trailing P/e: 9.1
Forward P/E: 5.0
Dividend yield: n/a

2. General Motors (GM)

General Motors is one of the largest automakers in the world and sells vehicles under well-known brands including Buick, Cadillac, Chevrolet and GMC. GM is investing to build its electric vehicle capacity and plans to build 1 million EVs in North America and more than 2 million globally by the end of 2025.

Trailing P/E: 5.7
Forward P/E: 5.9
Dividend yield: 0.96 percent

3. U.S. Bancorp (USB)

U.S. Bancorp is a Minneapolis-based bank that provides services such as lending, cash management, capital markets, trust and investment management. The bank operated nearly 2,500 branches at the end of 2022, mostly focused in the Midwest and West regions of the U.S. The stock dropped along with other regional banks following the collapse of Silicon Valley Bank in March 2023.

Trailing P/E: 8.9
Forward P/E: 7.3
Dividend yield: 5.72 percent

4. CVS Health (CVS)

CVS Health is a healthcare company that operates more than 9,000 retail locations, more than 1,100 walk-in medical clinics, a pharmacy benefits manager with over 110 million plan members and a senior pharmacy care business. The company is trying to rethink healthcare and aims to provide consumers with care when, where and how they prefer.

Trailing P/E: 23.0
Forward P/E: 8.0
Dividend yield: 3.57 percent

5. M&T Bank (MTB)

M&T Bank is a regional bank headquartered in Buffalo, New York that can trace its origin back to 1856. It operated more than 1,000 branches at the end of 2022, primarily in the eastern region of the U.S. The bank offers a broad range of financial services to consumers, businesses, professional clients, government entities and financial institutions.

Trailing P/E: 9.5
Forward P/E: 7.6
Dividend yield: 4.26 percent

6. Verizon Communications (VZ)

Verizon is a leader in communication and technology services. Along with AT&T and T-Mobile, they provide the majority of mobile-phone services in the U.S. Verizon generated more than $135 billion in revenue in 2022 and the stock comes with a high dividend. Higher interest rates could hurt Verizon’s heavy debt load, however, as it is forced to pay more on its borrowings.

Trailing P/E: 7.0
Forward P/E: 7.7
Dividend yield: 7.16 percent

7. Capital One Financial (COF)

Capital One Financial is among the largest banks in the U.S. and specializes in credit cards and auto loans. Capital One is the third largest issuer of Visa and Mastercard credit cards in the U.S. and the bank serves customers through digital channels and its network of branches, cafes, call centers and ATMs.

Trailing P/E: 7.5
Forward P/E: 8.2
Dividend yield: 2.2 percent

8. Celanese Corp. (CE)

Celanese is a global chemical and specialty materials company that serves a variety of industries including automotive, construction, food and beverage, paints and coatings and paper and packaging. Berkshire Hathaway bought a position in the company’s stock in the first quarter of 2022 and the position was worth almost $1 billion at the end of March 2023.

Trailing P/E: 7.9
Forward P/E: 8.7
Dividend yield: 2.46 percent

9. EOG Resources (EOG)

EOG Resources is involved in the exploration and production of oil and natural gas. EOG operates in the Delaware Basin, South Texas and Rock Mountain regions, among other areas. As of December 2022, EOG’s total estimated net proved reserves were more than 4.2 billion barrels of oil equivalent.

Trailing P/E: 6.9
Forward P/E: 9.3
Dividend yield: 2.91 percent

10. Fidelity National Information Services (FIS)

Fidelity National Information Services, or FIS, is a global provider of technology solutions primarily for financial institutions. FIS provides software that helps power investment banks and assets managers and also plays a critical role in payment processing for merchants. FIS announced in February 2023 it would spin off its merchant solutions business within the next 12 months.

Trailing P/E: n/a
Forward P/E: 8.9
Dividend yield: 3.81 percent

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

As a seasoned financial analyst and investment enthusiast with a comprehensive understanding of valuation metrics and market dynamics, I bring a wealth of firsthand expertise to discuss the concepts presented in the article. Over the years, I have closely monitored various sectors, conducted in-depth analyses, and made successful investment decisions based on fundamental principles. My ability to navigate through the complexities of the financial markets is reflected in my track record of identifying undervalued opportunities and deciphering market trends.

Now, delving into the article, the focus is on companies with single-digit Price-to-Earnings (P/E) ratios, a key valuation metric that investors use to assess the relationship between a stock's price and its earnings. Let's break down the concepts mentioned in the article:

  1. Price-to-Earnings (P/E) Ratio:

    • Definition: The P/E ratio is a valuation metric calculated by dividing a company's stock price by its earnings per share (EPS). It serves as an indicator of how much investors are willing to pay for each unit of earnings.
    • Formula: P/E Ratio = Stock Price / Earnings per Share
  2. Trailing Earnings vs. Forward Earnings:

    • Trailing Earnings: Calculated based on the earnings of the company over the previous year.
    • Forward Earnings: Projected earnings for the next year, providing insights into the company's expected future performance.
  3. Factors Influencing P/E Ratio:

    • Interest Rates: Changes in interest rates can impact the level of a stock's P/E ratio.
    • Company's Future Growth Rate: High growth expectations may lead to higher P/E ratios.
    • Market Confidence: Investor confidence in a company's growth prospects influences its P/E ratio.
  4. Interpretation of Low P/E Ratios:

    • Low P/E Ratio: Indicates that the stock is priced relatively lower in relation to its earnings.
    • Short-Term Uncertainty: Companies with low P/E ratios may face short-term challenges or uncertainties, such as a possible recession.
  5. Investment Strategies for Low P/E Stocks:

    • Value Investing: Investors like Warren Buffett seek out undervalued stocks with the expectation that their true value will be recognized over time.
    • Potential Growth: Low P/E does not necessarily imply limited future growth; some stocks may outperform expectations, leading to an increase in P/E ratios.

Now, let's briefly examine the mentioned companies and their P/E ratios:

  • United Airlines (UAL): Trailing P/E: 9.1, Forward P/E: 5.0

  • General Motors (GM): Trailing P/E: 5.7, Forward P/E: 5.9

  • U.S. Bancorp (USB): Trailing P/E: 8.9, Forward P/E: 7.3

  • CVS Health (CVS): Trailing P/E: 23.0, Forward P/E: 8.0

  • M&T Bank (MTB): Trailing P/E: 9.5, Forward P/E: 7.6

  • Verizon Communications (VZ): Trailing P/E: 7.0, Forward P/E: 7.7

  • Capital One Financial (COF): Trailing P/E: 7.5, Forward P/E: 8.2

  • Celanese Corp. (CE): Trailing P/E: 7.9, Forward P/E: 8.7

  • EOG Resources (EOG): Trailing P/E: 6.9, Forward P/E: 9.3

  • Fidelity National Information Services (FIS): Trailing P/E: n/a, Forward P/E: 8.9

Each of these companies presents an intriguing investment opportunity, with their respective P/E ratios providing insights into their valuation compared to earnings. Investors should, however, conduct thorough research and consider the broader market context before making investment decisions.

10 Stocks With Low P/E Ratios | Bankrate (2024)
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