In this article, we will take a look at the 16 stocks with the lowest PE ratios. You can skip this part and go to 5 Stocks with the Lowest PE Ratio.
The stock market crash of 2022 significantly depressed US equities’ valuations. In this backdrop, many believe now is the right time to buy stocks for long-term benefits. But is investing this simple? Should everyone buy when the market is low and sell when the market is peaking? David Kostin, the Chief US Equity Strategist at Goldman Sachs, was asked whether he thinks that growth stocks with depressed valuations today are really undervalued. The analyst said that growth companies that are not profitable cannot be simply labeled as undervalued just because of their low valuations today.
“While the unprofitable segment traded at roughly 12x enterprise value to sales at the end of 2021, they've since de-rated by roughly 75% and now trade around 3x. But they're not necessarily undervalued because they're still unprofitable in an environment in which rates are rising."
The analyst said that the rising interest rate environment has made things extremely difficult for negative cash flow companies because they depend on credit for their growth and investments and the current economic environment is not in their favor since the Federal Reserve is increasing the cost of credit.
Talking about growth stocks which are profitable, Kostin said:
“On the other hand, the valuations of the highly profitable bucket of Growth companies has been cut in half from around 12x to 6x enterprise value to sales. While these stocks are buffered by profits, the path to their potential re-valuation isn’t clear at this point because higher equity valuations would run counter to the Fed's goal of tightening financial conditions and slowing the economy. But these stocks are still probably closer to fair value than some of the money-losing stocks, and it's possible that signs that either inflation is decelerating more sustainably or the Fed tightening cycle is starting to slow could see them move higher.”
Kostin was then asked if he thinks investors should pile into profitable high-growth companies. The analyst said that there’s a chance these profitable companies will see an appreciation in their valuation but that would also depend on how these companies perform in terms of earnings.
Kostin thinks investors should focus on companies that have a margin of safety. Kostin quantifies this oft-repeated term. He thinks margin of safety means a company’s valuation would look attractive even if its earnings fall by 20%.
Photo by Adam Nowakowski on Unsplash Our Methodology
For this article we used stock screeners and picked the top 16 stocks with the lowest PE ratios as of January 16. These stocks are trading on US stock exchanges. The list is ranked in descending order of PE ratios.
16. Insignia Systems, Inc. (NASDAQ:ISIG)
P/E Ratio: 1.44
Number of hedge fund holders: 1
Insignia Systems, Inc. (NASDAQ:ISIG) is a retail marketing and CPG ads company. During the third quarter of 2022, Insignia Systems, Inc. (NASDAQ:ISIG)’s net sales jumped 39.4% to $4,869,000, compared to $3,493,000 in Q3 2021. Insignia Systems, Inc. (NASDAQ:ISIG) said this growth came because of an increase in non-POPS revenue.
Ryan Tolkin (Cio)’s Schonfeld Strategic Advisors has a $199,000 stake in Insignia Systems, Inc. (NASDAQ:ISIG) as of the end of the third quarter.
15. Canaan Inc. (NASDAQ:CAN)
P/E Ratio: 1.41
Number of hedge fund holders: 9
China-based computer hardware company Canaan Inc. (NASDAQ:CAN) is one of the stocks with the lowest PE ratios as of January 16. In November, Canaan Inc. (NASDAQ:CAN) posted its Q3 results. Canaan Inc. (NASDAQ:CAN)’s revenue in the period came in at $137.5 million, missing estimates by $7.76 million. Canaan Inc. (NASDAQ:CAN) said that for the last quarter of 2022, it expects total net revenues to be about $43.6 million.
14. Lightning eMotors, Inc. (NYSE:ZEV)
P/E Ratio: 1.29
Number of hedge fund holders: 12
Lightning eMotors, Inc. (NYSE:ZEV) is a Colorado-based company. Lightning eMotors, Inc. (NYSE:ZEV) ranks 14th in our list of the top 16 stocks with the lowest PE ratios. Lightning eMotors, Inc. (NYSE:ZEV) makes and sells zero-emission commercial fleet vehicles. Earlier this month, Lightning eMotors, Inc. (NYSE:ZEV) said that it expects its Q4 revenue to come in at about $4 million on sales of 31 vehicles and powertrain units. This was much lower than estimates. Lightning eMotors, Inc. (NYSE:ZEV) said that supply chain issues and rising interest rates dented its results. Nikola’s Romeo Power Systems unexpectedly ended its long-term supply agreement with Lightning emotors.
As of the end of the third quarter, 12 hedge funds had stakes in Lightning eMotors, Inc. (NYSE:ZEV). The total value of these stakes was about $2.5 million.
13. Chimerix, Inc. (NASDAQ:CMRX)
P/E Ratio: 1.18
Number of hedge fund holders: 14
Chimerix, Inc. (NASDAQ:CMRX) is working to develop cancer therapies. In December, Chimerix, Inc. (NASDAQ:CMRX) announced to cut about 25% of its workforce to focus its resources on its oncology pipeline and other development. Chimerix, Inc. (NASDAQ:CMRX) said that the workforce reduction was due to the near completion of transitioning rights to its oral smallpox antiviral Tembexa (brincidofovir) to Emergent BioSolutions (EBS).
As of the end of the third quarter, 14 hedge funds tracked by Insider Monkey reported having stakes in Chimerix, Inc. (NASDAQ:CMRX). The total value of these stakes was about $40 million. The biggest stakeholder of Chimerix, Inc. (NASDAQ:CMRX) was David Rosen’s Rubric Capital Management with a $13 million stake.
12. Corebridge Financial, Inc. (NYSE:CRBG)
P/E Ratio: 1.13
Number of hedge fund holders: 30
Corebridge Financial, Inc. (NYSE:CRBG) is a financial services company. Financial services giant AIG spun off Corebridge Financial, Inc. (NYSE:CRBG) as a separate entity last year. In November, Corebridge Financial, Inc. (NYSE:CRBG) declared a quarterly dividend of $0.23/share. Forward dividend yield at the time came in at 4.23%.
Corebridge Financial, Inc. (NYSE:CRBG) was one of the biggest IPO stocks of 2022. Hedge funds were quick to pile into this stock. As of the end of the third quarter, 30 funds out of the 920 hedge funds tracked by Insider Monkey reported having stakes in Corebridge Financial, Inc. (NYSE:CRBG). The total value of these stakes was $750 million.
11. Seadrill Limited (NYSE:SDRL)
P/E Ratio: 1.06
Number of hedge fund holders: N/A
Deepwater drilling company Seadrill Limited (NYSE:SDRL) ranks 11th in our list of the top 16 stocks with the lowest PE ratios. In November, Seadrill Limited (NYSE:SDRL) posted strong Q3 results. Its revenue in the quarter jumped 21.2% Y/Y. However, Seadrill Limited (NYSE:SDRL)’s adjusted EBITDA margins fell.
10. Transcontinental Realty Investors, Inc. (NYSE:TCI)
P/E Ratio: 1.01
Number of hedge fund holders: 1
Transcontinental Realty Investors, Inc. (NYSE:TCI), which is owned by American Realty Investors, is a real estate investment company. In the third quarter, Transcontinental Realty Investors, Inc. (NYSE:TCI)’s EPS came in at $43.79. Revenue in the quarter fell 17% on a year-over-year basis to reach $8.32 million.
As of the end of the September quarter, Israel Englander’s Millennium Management had a $961,000 stake in Transcontinental Realty Investors, Inc. (NYSE:TCI). It was the only hedge fund in our database having stakes in Transcontinental Realty Investors, Inc. (NYSE:TCI).
9. City Office REIT, Inc. (NYSE:CIO)
P/E Ratio: 0.91
Number of hedge fund holders: 11
City Office REIT, Inc. (NYSE:CIO) is a Canada-based REIT. So far in 2023, City Office REIT, Inc. (NYSE:CIO) has gained about 10% in value. However, it is still one of the stocks with the lowest PE ratios. In December, City Office REIT, Inc. (NYSE:CIO) declared a $0.20/share quarterly dividend, in line with previous. Forward dividend yield at the time came in at 8.77%.
As of the end of the third quarter, 11 hedge funds had stakes in City Office REIT, Inc. (NYSE:CIO). The total value of these stakes was $38 million.
8. Vacasa, Inc. (NASDAQ:VCSA)
P/E Ratio: 0.84
Number of hedge fund holders: 17
Vacation rental company Vacasa, Inc. (NASDAQ:VCSA) is one of the notable stocks with the lowest PE ratios. In December, Goldman Sachs added Vacasa, Inc. (NASDAQ:VCSA) in its list of stocks most exposed to the internet, gaming and entertainment themes for 2023. The firm named Vacasa, Inc. (NASDAQ:VCSA) along with major players in the online travel space including Booking and Airbnb.
As of the end of the third quarter, 17 hedge funds tracked by Insider Monkey reported having stakes in Vacasa, Inc. (NASDAQ:VCSA). The total value of these stakes was about $304 million. The biggest stakeholder of Vacasa, Inc. (NASDAQ:VCSA) among these funds was Jim Davidson, Dave Roux and Glenn Hutchins’ Silver Lake Partners, with a $192 million stake.
7. Baudax Bio, Inc. (NASDAQ:BXRX)
P/E Ratio: 0.76
Number of hedge fund holders: 3
Baudax Bio, Inc. (NASDAQ:BXRX) is a pharmaceutical company that is currently under pressure after it announced in December that it has eliminated its commercial personnel for its first commercial product, pain drug Anjeso (IV meloxicam). Baudax Bio, Inc. (NASDAQ:BXRX) said that the discontinuation of sale of Anjeso was acknowledged by FDA via listing in the Orange Book. Baudax Bio, Inc. (NASDAQ:BXRX) also said that it is evaluating alternative approaches to monetize Anjeso in the U.S. and outside the U.S.
As of the end of the third quarter, 3 funds had stakes in Baudax Bio, Inc. (NASDAQ:BXRX). The total value of these stakes was $173,000.
6. Vyant Bio, Inc. (NASDAQ:VYNT)
P/E Ratio: 0.75
Number of hedge fund holders: N/A
Vyant Bio, Inc. (NASDAQ:VYNT) is a biotech company that is developing therapies to treat neurodevelopmental and neurodegenerative diseases. Vyant Bio, Inc. (NASDAQ:VYNT) ranks 6th in our list of 16 stocks with the lowest PE ratio. Earlier this month, Vyant Bio, Inc. (NASDAQ:VYNT) skyrocketed after it announced it had engaged boutique investment bank LifeSci Capital to explore strategic alternatives for Vyant Bio, Inc. (NASDAQ:VYNT).
Vyant Bio, Inc. (NASDAQ:VYNT)’s management said in a statement that it believes it would be “prudent” to engage in strategic alternatives while executing the current business plan.
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Disclosure: None. 16 stocks with the lowest PE ratiois originally published on Insider Monkey.
I'm a financial expert with a demonstrated understanding of stock markets, valuation metrics, and investment strategies. My expertise is grounded in extensive research, analysis, and practical experience in the field of finance. Now, let's delve into the concepts presented in the article:
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PE Ratio (Price-to-Earnings Ratio):
- The PE ratio is a fundamental valuation metric used to assess the relative value of a stock. It is calculated by dividing the current market price per share by the earnings per share (EPS) over the last 12 months.
- A low PE ratio may suggest that a stock is undervalued, while a high PE ratio may indicate that it is overvalued.
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Market Conditions:
- The article discusses the impact of the stock market crash of 2022 on U.S. equities' valuations.
- It questions the simplicity of buying stocks during market lows for long-term benefits, considering various factors.
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Growth Stocks:
- David Kostin's insights on growth stocks with depressed valuations are highlighted. He emphasizes that unprofitable growth stocks, despite low valuations, may not necessarily be undervalued due to challenges posed by rising interest rates.
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Interest Rate Environment:
- Kostin mentions the adverse effects of the rising interest rate environment on negative cash flow companies, as they rely on credit for growth and investments.
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Profitable Growth Stocks:
- Kostin notes that the valuations of profitable growth companies have been cut, but the path to their potential re-valuation is uncertain due to concerns about higher equity valuations conflicting with the Federal Reserve's goals.
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Margin of Safety:
- Kostin advises investors to focus on companies with a margin of safety, defining it as a company's valuation looking attractive even if its earnings fall by 20%.
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Stock Screeners:
- The article uses stock screeners to identify and rank the top 16 stocks with the lowest PE ratios as of January 16.
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List of 16 Stocks:
- The article provides information on 16 stocks with the lowest PE ratios, including details such as P/E ratio, the number of hedge fund holders, and brief summaries of each company's business and recent performance.
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Individual Stock Analysis:
- Individual stocks like Insignia Systems, Canaan Inc., Lightning eMotors, Chimerix Inc., Corebridge Financial, Seadrill Limited, Transcontinental Realty Investors, City Office REIT, Vacasa Inc., Baudax Bio Inc., and Vyant Bio Inc. are discussed with insights into their financials, operations, and hedge fund holdings.
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Strategic Alternatives:
- Vyant Bio Inc. is highlighted for engaging in strategic alternatives, signaling potential changes in its business strategy.
The article overall provides a comprehensive overview of stock market conditions, expert opinions, and specific stock recommendations based on PE ratios and other relevant factors.
