5 Growthy Stocks Trading Below 15X Earnings

These Equities Offer New Company Growth at Old Company Valuations

Source: Shutterstock

Stock market investors like to find high-growth stocks, especially when they can discover them at a low price-earnings (P/E) ratio. Many of these equities command high multiples, however, if they have earnings at all. Likewise, most stocks are rightfully valued at low P/E ratios because they exhibit low levels of growth.

Most of the better-known, high-growth stocks exist in up-and-coming industries. Growth-seeking traders often ignore older industries in favor of new niches, or business models, that can deliver. But finding “growthy” stocks with “boring” valuations can be difficult, if not downright impossible. Those stocks that do have low valuations often trade there for a reason.

Occasionally, while searching for innovation in a lower-profile segment of the economy, you will stumble on double-digit growth coupled with palatable valuations … which is what we’ve compiled for you here.

The following five stocks trade at a forward P/E ratio below 15, and analysts expect their average respective growth rates to exceed 20% annually over the next five years! Read on for more:

Marathon Petroleum (MPC)

Forward price-earnings ratio: 9.93

Marathon Petroleum (NYSE:MPC) operates as a downstream oil company specializing in refining. Most high-growth stocks in the oil and gas industry participate in the upstream market. However, upstream markets experience extreme boom and bust cycles.

The need for refined product does not see these extreme fluctuations. Hence, investors can experience this high growth in a more stable part of the industry. Also, now that it has completed its takeover of Andeavor (formerly Tesoro), the company owns and operates 16 refineries across the United States.

This acquisition also returns MPC stock to high growth. After seeing earnings shrink in past years, analysts project a 10.8% increase in profits for 2019. They also predict average growth of 35.2% per year over the next five years. The market has not yet seemed to notice MPC’s return to growth. Despite the massive increase projected, the forward P/E stands at 9.2 — well below the index average of 18X.

Interestingly, MPC stock has also followed the path of many tech stocks. The fall selloff saw MPC fall by almost 39% between early October and Christmas Eve. Although it has recovered some of that loss, Marathon still trades 28% lower than the October high.

Stockholders should also not forget the dividend, which will pay them $2.12 per share for the year. This has risen for eight consecutive years and yields 3.3%. For a combination of old company stability and new company growth, investors should look no further than MPC stock.

Olin (OLN)

 

P/E ratio: 12.39

Olin (NYSE:OLN) produces and distributes ammunition, chlorine and sodium hydroxide across the United States and the world. This Clayton, Missouri-based company has existed since 1892. After years of falling profits, OLN stock has now become one of the more surprising high-growth stocks.

Earnings increased by a whopping 132% in 2018. While earnings growth will likely come in around the low-double-digits for 2019, analysts forecast an average growth rate of 40.75% per year for the next five years. For this massive growth, investors pay less than 12.5 times future earnings.

Olin stock is also recovering from a rough patch. Earnings for the fourth quarter fell from year-ago levels. OLN stock had also fallen throughout 2018, losing about half of its value. However, OLN stock has risen 44% since hitting that low in late December. Moreover, despite that recovery, it still trades about 33% below the all-time high from January 2018.

Olin shares have also maintained an 80-cent per share annual dividend since 1999. At today’s prices, that brings the yield to around 3.1%. The most recent 20-cent quarterly dividend was its 369th consecutive quarterly payment.

No, ammunition and chemicals aren’t as sexy as self-driving cars or 5G … still, when you can buy profit growth above 40% for just over 12 times earnings, you experience a different form of excitement …

Spirit (SAVE)

Source: Shutterstock

P/E ratio: 9.46

Spirit (NYSE:SAVE) operates in an industry that has historically had a poor investor reputation. However, thanks to Southwest (NYSE:LUV), that perception changed. Many investors would classify Southwest as one of the cheap, high-growth stocks. However, the company that may take the Southwest model to new levels is Spirit Airlines.

That certainly proved true with airfares. It has accomplished this mostly by cutting frills to the lowest point legally possible. Moreover, it is going to build on Southwest’s one plane type model by adding a regional jet. This will allow Spirit to serve markets that cannot accommodate larger aircraft either physically or financially. This could also bring the so-called “Southwest Effect” to small markets, bringing lower fares to markets currently dominated by legacy carriers.

Spirit also continues to move into new markets. It has recently added U.S. cities such as Austin and Raleigh-Durham. It also extended its push further into South America by adding Cali, Colombia late last year.

SAVE stock maintains a P/E ratio of 9.4. This is actually not cheap by airline industry standards. Still, the average growth rate of about 23.8% per year for the next five years outperforms Southwest and other peers. In short, Spirit stock has mastered the art of attracting the most fare-sensitive flyers. This should help SAVE stock to fly higher as its ability to serve more low-fare customers continues to soar.

Terex (TEX)

Source: Shutterstock

P/E ratio: 9.61

Terex (NYSE:TEX) specializes in work platforms, cranes, and other solutions for industries such as construction, quarrying, recycling, refining, and utilities. Once a division of General Motors (NYSE:GM), it has operated as an independent company since 1988.

As the country rebuilds its infrastructure, contractors will continue to utilize Terex equipment. Among its most significant projects is I-4 Ultimate—the expansion of Interstate 4 in Central Florida. Terex has also sold trucks to German construction firms as that country ramps up an infrastructure upgrade valued at €269.6 billion ($304.7 billion).

TEX stock has traded in a range for some time and steadily dropped throughout 2018. Still, it has spiked much higher in the previous decade, and the conditions might propel the stock to surge higher again.

TEX stock currently trades at around 9.3 times earnings. This comes in well below the average P/E of 21.3 that the saw stock over the last five years. For this year, they predict a 28.2% increase in earnings. That stands well below the expected average for the next five years, which analysts estimate at 37.4% per year.

With the ongoing need for construction, and many developed countries contemplating infrastructure upgrades, TEX is one of the high-growth stocks positioned to benefit. Investors should consider TEX while they can still buy it at a low multiple.

Weight Watchers (WTW)

P/E ratio: 8.56

Weight Watchers (NYSE:WTW) could see another upswing in the coming months and years. In 2016, WTW became one of the more surprising high-growth stocks as it rose by about tenfold over two years. Oprah Winfrey served as the company spokesperson during much of that time, and many credit Oprah with this increase.

However, WTW stock began a brutal downturn despite bullish sentiment. Revenues continued to rise as customers took well to CEO Mindy Grossman’s strategy of emphasizing wellness over weight loss. Still, the equity has lost about 70% of its value since June.

I was bearish on the stock last spring when it traded at more than double today’s value. I have now changed my view, at around $30 per share, the stock has fallen to just 8.6 times forward earnings. Such a multiple should imply little profit growth …

… looking at the financials, projections show nothing “little” about Weight Watchers’ earnings increases. When 2018 earnings come out, analysts project 75% profit growth. They forecast further double-digit growth in 2019 with a predicted increase of 24%. Revenues followed suit, rising by a predicted 17.2% in 2018. They should go up by an additional 10.4% in 2019.

Either way, the stock may have moved ahead of itself in June, but this subsequent selloff has run too far. Thanks to the massive profit growth and the single-digit P/E, prospective buyers now have a great opportunity to fatten up on WTW stock.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.


Article printed from InvestorPlace Media, https://investorplace.com/2019/02/high-growth-low-pe-stocks-to-buy/.

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