The 10 cheapest S&P 500 stocks right now


There are still plenty of cheap stocks out there, even with the major indices near record highs.

Barron screened the

S&P 500 Index

and identified the 10 stocks with the lowest price-to-earnings ratios using the 2022 earnings projections, based on FactSet data.

The 10 cheapest companies include memory chip makers

Micronic technology

(ticker: MU) and

Western digital

(WDC), producer of chemicals

LyondellBasell Industries

(LYB) and life insurer

Lincoln National

(LNC). Nine of the 10 have P / E ratios less than six. Lyondell has the highest multiple of the group, at 6.5 times the estimated profit in 2022.

The other six stocks are drug manufacturers

Viatris

(VTRS) and

Organon

(OGN); oil and gas producers

Diamondback Energy

(FANG) and

APA

(APA), formerly Apache; builder

Pulte Group

(PHM) and insurer

Unum

(A M).

Several stocks have seen big gains in the past year, including Diamondback, Micron, and Lincoln National, but all remain cheap based on earnings.

Company / Teleprinter Recent price Market value (bill) Price change over 1 year C / B Ratio 2022E *
Viatris / VTRS $ 14.82 $ 17.9 -10.8% 3.9
Unum / UNM Group 26.14 5.3 38.8 4.8
Diamondback / FANG Energy 69.80 12.6 56.8 5.2
Western Digital / WDC 61.07 18.7 73.0 5.5
APA / APA 16.68 6.3 4.3 5.6
Pulte / PHM Group 52.43 13.6 12.1 5.6
Organon / OGN 33.61 8.5 N / A 5.7
Lincoln National / LNC 66.87 12.5 79.6 5.8
Micron / MU technology 70.60 79.5 59.6 5.9
LyondellBasell Industries / LYB 100.36 33.5 43.8 6.5

* P / E ratio based on 2022 calendar estimates; E = estimate; N / A = not applicable

Source: FactSet

Why are stocks so cheap?

Some, like Viatris and Organon, have large but manageable debt. Investors fear profits will peak at companies like Micron, Lyondell and

Western digital.

These concerns could create opportunities for investors. Micron, whose shares are trading around $ 70, recently issued a small dividend resulting in a 0.6% return. JP Morgan analyst Harlan Sur wrote earlier this month that he expected Micron and rivals to be “disciplined and cautious” about increasing supply in the face of a strong demand. He has an overweight rating and a target price of $ 140 on the stock.

Western Digital, at around $ 61, is a leading manufacturer of flash memory. Morgan Stanley analyst Joseph Moore is bullish about his outlook, giving the stock an overweight rating and a price target of $ 88. He thinks the stock is too cheap considering he expects a profit of $ 10 per share next year.

Organon, a

Merck

(MRK), which owns a portfolio of off-patent drugs and a women’s health business, recently reported better-than-expected earnings. He set an annual dividend of $ 1.12, yielding 3.3% at a recent price of $ 33.50.

Joe Cornell, the publisher of Spin-Off Research, has a buy rating and a price target of $ 45 on the stock. Organon has “top tier” performance, he recently wrote, and “medium term revenue growth and margin dynamics.”

Viatris, a generic drug manufacturer from

Pfizer

(PFE), has the lowest P / E of the S&P 500 at 3.9. Its shares recently traded below $ 15.

JP Morgan analyst Chris Schott was encouraged by the company’s second quarter earnings report but maintained a neutral rating as he waits for more evidence of improved financial performance after a year 2020 difficult. The share has a yield of 3%.

Energy stocks have fallen sharply since June 1 due to lower oil prices and a change in sentiment towards the sector.

Diamondback Energy, a leading exploration and production company in Texas’s Permian Basin, saw its shares drop to $ 70 from $ 100 recently. The company posted strong second quarter results and increased its dividend 12.5% ​​to $ 1.80 per share on an annualized basis. The stock now returns around 2.6%.

Like many E&P, Diamondback has a high free cash flow yield. JP Morgan analyst Arun Jayaram is bullish on Diamondback and recently estimated its net asset value at $ 126 per share. APA produces oil and gas in the United States and overseas and offers play on a potentially large offshore oil field off Suriname in South America. Its shares are trading around $ 16.

Shares of PulteGroup, one of the largest home builders in the United States, fell about 20% from a spring peak, to $ 52 recently, amid concerns about demand and fixing power. prices.

Evercore ISI analyst Stephen Kim, one of the industry’s most bullish Wall Street analysts, sees the profitability of Pulte and his peers rise. It has an outperformance rating on Pulte and a price target of $ 93. He sees around $ 8 a share in earnings this year and an above-consensus estimate of around $ 12 next year.

Lyondell, third independent chemist in the world, is a major player in the plastics industry. Its shares were recently trading around $ 100. Its CEO, Bob Patel, recently said Barron Jack Hough: “Whether we are at the peak, whether there is a moderation or a hard reset, it is at the heart of the debate today with investors. I think there is a strong demand ahead of us.

Lincoln National, which offers life insurance, annuities and other financial products, recently traded around $ 67, less than six times projected profits in 2022 and below a conservative measure of value. accountant of $ 75. JP Morgan analyst Jimmy Bhullar likes Lincoln National, recently citing an “improvement in the business mix” and a “discount assessment.” He has an overweight rating and a target price of $ 81.

Unum, a provider of life and disability insurance, trades low based on income and book value. This in part reflects concerns about its long-term care insurance reserves, which were boosted in 2020. The stock, at around $ 26, is trading around five times projected earnings in 2022 and for half of its stock. book value.

Write to Andrew Bary at andrew.bary@barrons.com

About Hubert Lee

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