3 Stocks With Low PEG Ratios

These companies appear to be good opportunities given their growth potential

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Aug 31, 2022
Summary
  • West Fraser Timber, D.R. Horton and Tenet Healthcare appear to be undervalued by the market.
  • At around 1 or less, their trailing 12-month and forward price-earnings to growth ratios are more attractive than the S&P 500's PEG ratio.
  • Wall Street sell-side analysts have also issued positive recommendation ratings for these stocks.
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When searching for bargain opportunities, investors may want to look for stocks whose trailing 12-month and forward price-earnings to growth ratios are around 1 or below, which is the S&P 500's PEG ratio at the time of writing.

The PEG ratio is calculated as the price-earnings ratio without non-recurring items divided by the five-year Ebitda growth rate. For banks and credit services companies, the five-year book value growth rate is used instead.

The forward PEG ratio is calculated as the price-earnings ratio without NRI divided by the expected future earnings per share growth rate, which is a projection for the next five years based on analysts' estimates.

The three stocks listed below meet the above criteria. Wall Street has also issued positive recommendation ratings for these stocks, meaning analysts expect higher share prices over the coming months.

West Fraser Timber

The first company that makes the cut is West Fraser Timber Co. Ltd. (

WFG, Financial), a Canadian producer and seller of lumber, panels, pulp and paper.

As of regular trading on Aug. 31, West Fraser Timber has a share price of $90.19 and a price-earnings ratio of 3.57. The historical five-year Ebitda growth rate is 24.30% and the estimated future five-year earnings growth rate is 28.83%. Thus, the trailing 12-month PEG ratio is 0.15 and the forward PEG ratio is 0.12.

With the stock up 19.55% over the past year, the market cap is now $7.93 billion and the 52-week range is between $71.35 and $102.96.

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GuruFocus assigned a score of 9 out of 10 for the company's financial strength and 9 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of buy with an average target price of $121.88 per share.

D.R. Horton

The second company that qualifies is D.R. Horton Inc. (

DHI, Financial), an Arlington, Texas-based residential construction company.

As of regular trading on Aug. 31, D.R. Horton has a share price of $71.42 and a price-earnings ratio of 4.59. The historical five-year Ebitda growth rate is 28.60% and the estimated future five-year earnings growth rate is 11.98%. Thus, the trailing 12-month PEG ratio is 0.16 and the forward PEG ratio is 0.38.

Due to a 26.38% decline over the past year, the market capitalization is $24.84 billion and the 52-week range is $59.25 to $110.45.

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GuruFocus assigned a score of 6 out of 10 for the company's financial strength and 10 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $90.71 per share.

Tenet Healthcare

The third company that meets the criteria is Tenet Healthcare Corp. (

THC, Financial), a Dallas-based operator of medical care facilities in the U.S.

As of regular trading on Aug. 31, Tenet Healthcare has a price of $56.53 and a price-earnings ratio of 7.03. The historical five-year Ebitda growth rate is 9.40% and the estimated future five-year earnings per share growth rate is 8%. Thus, the trailing 12-month PEG ratio is 0.75 and the forward PEG ratio is approximately 0.88.

Following a 24.63% decrease over the past year, the market capitalization is $6.09 billion and the 52-week range is $50.37 to $92.65.

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GuruFocus assigned a score of 3 out of 10 for the company's financial strength and 6 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of buy with an average target price of $93.82 per share.

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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