S&P/ASX 200 Index (ASX: XJO) shares closed Friday's session only slightly in the green, up 0.23%.
It's been a rough year for ASX 200 shares so far. From the first day of trading on 4 January, the index fell about 15% until bottoming in mid-June.
Since then, there's been a highly volatile rebound with ASX 200 shares up about 11%. Overall, ASX 200 shares are down 5.8% in the year to date.
This market downturn had led to a bunch of ASX 200 shares trading on single-digit price-to-earnings (P/E) ratios.
As we explain in Motley Fool's Education Centre, the P/E ratio — also called the 'earnings multiple' or 'price multiple' — is a commonly-used metric that helps investors determine a company's value.
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What is a P/E ratio?
A P/E ratio measures a company's current share price against its earnings per share (EPS). Stocks with P/E ratios below 15 are generally considered cheap and those above 18 are considered expensive.
There are other factors to consider, though. For example, a high-quality ASX 200 stock might be deserving of a premium share price (and thus a high P/E ratio), so it's not necessarily one to avoid.
Another consideration is that a low P/E might signal problems with the company. Perhaps its share price has taken a dive because significant structural headwinds have arisen that are unique to its business.
However, today we see a mixed bag of high-quality ASX 200 shares trading on single-digit P/Es because of a broader market downturn brought about by rising inflation and interest rates.
These macroeconomic headwinds are impacting most ASX 200 companies and the value of their shares in 2022. This makes low P/Es more relevant as potential buying signals for long-term investing.
Motley Fool Australia's chief investment officer, Scott Phillips recently discussed low P/Es among ASX 200 retail shares, saying: "With a long-term lens, I think we'll look back and see retail on single digit P/Es and say, 'Man, really?'".
Phillips used JB Hi-Fi Limited (ASX: JBH) shares, trading on a P/E ratio of 9.01, as an example and said:
I think what we'll do is look back and when JB Hi-Fi's profits are whatever they are in 2027, and we look back and say, 'Man, we had an opportunity to buy that, [but] we were so worried about the short term'.
Which ASX 200 shares have single-digit P/E ratios?
For the purposes of this article, we'll focus on ASX 200 shares representing large, established businesses that we all know well by either their names or their products, which are trading on single-digit P/Es.
These are not buying recommendations. As all investors know, thorough individual company research is required before choosing which shares to buy. We're just highlighting a few ASX 200 shares on single-digit P/Es for you to consider.
We've excluded mining companies because many commodity prices are at the height of their cycle. This is distorting P/E ratios at the moment because earnings are so high — but are inevitably temporary.
For example, the biggest ASX 200 share by market cap, BHP Group Ltd (ASX: BHP), currently has a P/E ratio of 7.52. ASX coal share Whitehaven Coal Ltd (ASX: WHC) has a P/E ratio of 4.43.
Over to you for review.
First up we have a selection of ASX 200 real estate shares or real estate investment trusts (REITs).
ASX 200 blue chip Goodman Group (ASX: GMG) has a P/E ratio of 9.99.
Stockland Corporation Ltd (ASX: SGP) has a P/E of 6.07 and Vicinity Centres (ASX: VCX) has a P/E of 7.26. There's also apartment developer Mirvac Group (ASX: MGR) with a P/E ratio of 9.22.
Among ASX 200 retail shares, we have the household name Harvey Norman Holdings Limited (ASX: HVN) with a P/E ratio of 6.3.
There's also Super Retail Group Ltd (ASX: SUL), owner of Supercheap Auto and Rebel, with a P/E ratio of 9.89.
Among ASX 200 financial shares, we have Virgin Money UK CDI (ASX: VUK) with a P/E ratio of 3.75. Just outside the list is Australia and New Zealand Banking Group Ltd (ASX: ANZ) with a P/E of 10.27.
