After looking for discounts among a large number of stocks, I put together a short list of companies that are showing attractive valuations. By comparing expected earnings growth and share price multiples, these four below look to be good value stocks.
A combination of low market expectations, weaker consumer sentiment and industry cycle lows have reduced share prices…and opened up long-term opportunities.
Woodside Petroleum Limited (ASX: WPL) is selling at a 13 PE, which is at the very bottom of its past average PE range. The energy producer is considering a number of new projects and has a multi-billion dollar war chest ready for investment and acquisitions. It has a low price to growth ratio of 0.70, suggesting its share price may be at a discount to its expected growth. The stock yields a whopping 5.8% fully franked.
Ansell Limited (ASX: ANN), the leading producer of industrial and medical gloves as well as other protective wear, is forecasting FY 2015's earnings per share to rise 7% – 15%. With a 2.3% dividend yield, those two combined compare well with the 16 PE it trades at. Buying market leaders when there is a little price weakness is a good way to build up a position.
Super Retail Group (ASX: SUL) is trading just around $8 a share, near 52-week lows. The specialty retailer with brands such as Supercheap Auto, BCF, Rebel Sports and Amart Sports is being held down by general retail trade weakness. However, an expected reduction of operating costs should give it some support. Its 14 PE is low compared to past average PEs. Its big 4.9% fully franked yield would be attractive to dividend investors.
UGL Limited (ASX: UGL), the engineering, property services and asset management company will be completing the sale of its DTZ property services division. That will allow the company to pay down its debt and concentrate on its core engineering and asset management business. Its share price is near $6, just above a multi-year low and trading at a PE of 11.7. Consensus estimates are for earnings to grow around 13% annually in the next two years. Mining may be close to a cyclical low, so UGL could be near a bottom as well.
Looking for value stocks is one part of successful investing. Building in protection against the downside for insurance is another. Dedicating a part of your portfolio to dividend income is the first step. Along with these four, I would suggest considering one more stock with big potential.
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Chart Source: Yahoo! Finance
