10 Low Price-Earnings Stock Picks for the Enterprising Investor

LyondellBasell tops the list

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Benjamin Clark
Mar 20, 2019
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There are a number of great companies in the market today. By using the ModernGraham valuation model, I've selected 10 low price-earnings stocks for the Enterprising Investor. These companies have the lowest PEmg (price-normalized earnings) ratios out of all companies reviewed. Each company has been determined to be suitable for the Enterprising Investor and undervalued according to the ModernGraham approach.

Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to select companies that present a moderate (though still low) amount of risk.

LyondellBasell Industries NV (

LYB, Financial)

LyondellBasell is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last 10 years and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $6.13 in 2014 to an estimated $10.84 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.41% annual earnings loss over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into LyondellBasell revealed the company was trading above its Graham number of $77.64. The company pays a dividend of $3.55 per share, for a yield of 4.3%, putting it among the best dividend-paying stocks today. Its PEmg (price over earnings per share) was 7.68, below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value of $-16.01.

LyondellBasell performs fairly well in the ModernGraham grading system, scoring a B.

Lincoln National Corp. (

LNC, Financial)

Lincoln National is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from $4.25 in 2014 to an estimated $7.01 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.58% annual earnings loss over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lincoln National revealed the company was trading below its Graham number of $117.31. The company pays a dividend of 87 cents per share, for a yield of 1.7%. Its PEmg was 7.33, below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Lincoln National performs fairly well in the ModernGraham grading system, scoring a B+.

Synchrony Financial (

SYF, Financial)

Synchrony Financial is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from $2.22 in 2015 to an estimated $3.36 for 2019. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.7% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Synchrony Financial revealed the company was trading below its Graham number of $43.03. The company pays a dividend of 72 cents per share, for a yield of 2.2%, putting it among the best dividend-paying stocks today. Its PEmg was 9.91, below the industry average of 21.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Synchrony Financial fares extremely well in the ModernGraham grading system, scoring an A-.

BorgWarner Inc. (

BWA, Financial)

BorgWarner is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from $2.58 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.72% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into BorgWarner revealed the company was trading below its Graham number of $43.32. The company pays a dividend of 68 cents per share, for a yield of 1.6%. Its PEmg was 11.93, below the industry average of 21.23, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its NCAV of $-9.33.

BorgWarner performs fairly well in the ModernGraham grading system, scoring a B+.

Citizens Financial Group Inc. (

CFG, Financial)

Citizens Financial is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from a loss of 8 cents in 2015 to an estimated $3.21 for 2019. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.47% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Citizens Financial revealed the company was trading below its Graham number of $60.22. The company pays a dividend of 98 cents per share, for a yield of 2.7%, putting it among the best dividend-paying stocks today. Its PEmg was 11.44, below the industry average of 16.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Citizens Financial fares extremely well in the ModernGraham grading system, scoring an A-.

Morgan Stanley (

MS, Financial)

Morgan Stanley is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from $1.23 in 2014 to an estimated $3.46 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.9% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Morgan Stanley revealed the company was trading below its Graham number of $63.69. The company pays a dividend of 90 cents per share, for a yield of 2.1%, putting it among the best dividend-paying stocks today. Its PEmg was 12.29, below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Morgan Stanley fares extremely well in the ModernGraham grading system, scoring an A-.

Bank of America Corp. (

BAC, Financial)

Bank of America is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from 76 cents in 2015 to an estimated $2.2 for 2019. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.46% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Bank of America revealed the company was trading below its Graham Number of $39.29. The company pays a dividend of 54 cents per share, for a yield of 1.8%. Its PEmg was 13.42, below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of America performs fairly well in the ModernGraham grading system, scoring a B+.

KeyCorp (

KEY, Financial)

KeyCorp is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from 91 cents in 2014 to an estimated $1.24 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.16% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into KeyCorp revealed the company was trading below its Graham number of $22.58. The company pays a dividend of 38 cents per share, for a yield of 2.4%, putting it among the best dividend-paying stocks today. Its PEmg was 12.83, below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

KeyCorp fares extremely well in the ModernGraham grading system, scoring an A-.

Huntington Bancshares Inc. (

HBAN, Financial)

Huntington Bancshares is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from 66 cents in 2014 to an estimated 96 cents for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.68% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Huntington Bancshares revealed the company was trading below its Graham number of $15.53. The company pays a dividend of 35 cents per share, for a yield of 2.6%, putting it among the best dividend-paying stocks today. Its PEmg was 13.86, below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Huntington Bancshares fares extremely well in the ModernGraham grading system, scoring an A-.

Regions Financial Corp. (

RF, Financial)

Regions Financial is suitable for the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg from 52 cents in 2014 to an estimated $1.1 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.75% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Regions Financial revealed the company was trading below its Graham number of $21.6. The company pays a dividend of 32 cents per share, for a yield of 2%. Its PEmg was 13.99, below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Regions Financial fares extremely well in the ModernGraham grading system, scoring an A-.

What do you think? Are these companies a good value for Enterprising Investors? Is there a company you like better?

Disclosure: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours. This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not related to the companies mentioned in any capacity. Please take a moment to read our detailed disclaimer. This article first appeared on ModernGraham.

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Benjamin is one of TipRank's top bloggers. He is the founder of ModernGraham.com, a value investing website devoted to the study and modernization of the teachings of Benjamin Graham.