3 Value Plays with P/E Ratios Under 10



5 min read


This story originally appeared on MarketBeat

After years of underperformance, the value style of investing is back in favor. With the economic recovery progressing nicely, the industrials, financials, materials, and energy sectors have been popular places to find undervalued stocks.

Progress with the Biden administration’s infrastructure bill has placed companies associated with ‘the old economy’ back in the spotlight this week. Construction, utility, and other infrastructure stocks are expected to be among the biggest winners if the legislation is approved in the House.

Value investors seeking inexpensive ways to play the domestic economic revival don’t have as many choices as they did a year ago. There are, however, still some attractive bargains out there. Let’s look at a few examples.

 Is Chemours a Good Value Stock?

With Chemours (NYSE: CC), investors get one of the most diversified ways to play the resurgence of the industrial sector. That’s because the company’s specialty chemicals have a broad range of uses from air conditioning and refrigeration to plastics, oil refining, and mining. The maker of Teflon and other popular industrial brands has a strong global presence that should give it ample opportunity to grow as its end markets come back to life.

Chemours did a solid job of managing the pandemic and now finds it in a position to reap the rewards of a strengthening economy. Demand for its products and services is on the rise as are its financial results. Second-quarter sales jumped 51% and profits increased 18% with all four operating segments posting gains. With every business unit back in growth mode and the recovery still in its early stages, better quarterly performances are likely ahead.

The stock climbed above $38 in early June and has pulled back a bit since. On the heels of a year in which earnings are expected to more than double, analysts are forecasting EPS to grow 14% to $4.20 in fiscal 2022. That means that Chemours is trading at 8.2x forward earnings estimates which along with the 3% dividend yield makes it a highly compelling value stock.

Is Goodyear Tire & Rubber an Undervalued EV Play?

After recording sharp losses in 2020, Goodyear Tire & Rubber (NASDAQ: GT) is expected to turn a profit this year—and then build off the turnaround with a strong 2022. Analysts are expecting earnings to soar 89% next year to $2.38. This means that the tire manufacturer can be had for around 7x forward earnings

One of the most attractively valued U.S. mid-cap stocks, Goodyear has a lot riding on the economic recovery. It has a presence in 23 countries and heavy exposure to the commercial trucking space through its network of service and tire retreading centers. As business activity ramps up, more trucks on the road may be a headache for summer travelers but is very good news for Goodyear.

At the same time, the company may be one of the most underappreciated ways to play the electric vehicle (EV) space. While much attention has been directed toward its exposure to the struggling consumer auto industry, further down the road, Goodyear as a huge opportunity to hitch a ride on the multiyear EV growth story.

It is investing handsomely in its EV tire platform and especially in the Goodyear ‘recharge’, a lightweight eco-friendly tire for EVs. Earlier this year it joined forces with digital, electric rental car company UFODRIVE to develop technology that improves fleet performance. Another partnership with French automaker Citroen has further announced its presence in the EV market.

Is Sanmina Stock a Good Buy?

Technology companies aren’t often categorized as value plays, but Sanmina (NASDAQ: SANM) certainly fits the mold. The electronics manufacturing services (EMS) provider trades at 9.1x fiscal 2022 earnings and has exposure to some the biggest expected beneficiaries of infrastructure spending.

Sanmina’s main customers are in the communications, networking, industrial, and consumer markets along with several other growing industries. Its printed circuit boards, electronic product assembly, and testing services are seeing higher demand alongside the bump in economic activity. The passage of the infrastructure bill would provide another major boost with $65 billion earmarked for expanding broadband internet access.

To reach its earnings targets, Sanmina must continue to navigate the supply chain challenges and associated margin pressures that are impacting much of the global technology sector. But if it can successfully manage the near-term headwinds and deliver even modest bottom-line growth, it will be in a great position as operating conditions normalize.

This means that investors will need to be patient on this stock and that’s part of why the valuation is where it is. But with Sanmina shifting its business mix towards the more profitable industrial, medical, automotive end markets while having reliable communications and cloud infrastructure businesses as a base, the stock should start to gravitate towards higher multiples to reflect the higher growth and stability of the revamped business model.



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