So-called value investors like to compare the cost of a stock to how much money the company is actually making. By using a metric called price-to-earnings (P/E) ratio, investors can see how much they will have to pay in share price on the open market to get a dollar of underlying company profits. Similarly, price-to-sales (P/S) ratio gives the price for a dollar of underlying company revenue. Value investors expect the market to eventually shine on those companies that are making more money for their price than their peers.
Are they right? The answer is both yes and no. Plenty of “expensive” stocks have been great investments over the years: Facebook or Amazon are recent examples. Others, known as “value traps,” are cheap because they’re bad companies on the decline. Even with the best metrics, the stock market remains unpredictable.
Ultimately, price ratios are still just one piece of a comprehensive process for judging companies. Still, focusing on affordable stocks is a tried and true method that has the endorsement of successful investors like Warren Buffett.
Last updated: Feb. 17, 2021
1. CVS Health Corporation (CVS)
Price per Share: $72.70
P/E Ratio: 12.02
P/S Ratio: 0.36
Pharmacy services provider and drugstore chain CVS was and is a major player in the fight against COVID-19 — but it’s a major player in the pharmacy and retail space, period. CVS commands a full 25 percent of the market share and although it’s stock has been underwhelming lately, its fundamentals are strong. With a yield of 2.62 percent, it’s not the best dividend stock out there, but it’s much better than the S&P 500 average of 1.55 percent.
CVS is a good buy for shoppers, too.
2. Prudential Financial, Inc. (PRU)
Price per Share: $81.94
P/E Ratio: 8.17
P/S Ratio: 0.54
Prudential, a provider of insurance and investment services, is a relative steal with its P/E ratio. Financial companies typically offer lower price ratios than other sectors. The company also offers an impressive dividend yield of 5.37 percent, making it a potentially attractive income stock as well.
3. Express Scripts Holding Company (ESRX)
Price per Share: $92.33
P/E Ratio: 10.8
P/S Ratio: 0.52
Express Scripts is a pharmacy benefit management company offering a wide variety of services associated with providing prescription drugs to patients. It received a perfect score as a “best place to work” for LGBTQ individuals from the Human Rights Campaign Foundation.
4. American Airlines Group Inc. (AAL)
Price per Share: $15.43
P/E Ratio: 3.22
P/S Ratio: 0.28
American Airlines is the largest airline in the world. It’s planning to fly less than half of its 2019 schedule through February at least, but the airline/travel industry as a whole was shaken to the core by the pandemic. When the fog clears and planes are full once again, American will have the youngest fleet among all U.S. legacy carriers. A recent Benzinga survey reported that 64 percent of respondents believe the stock will hit $30 within two years
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5. Macy’s, Inc. (M)
Price per Share: $14.27
P/E Ratio: 3.34
P/S Ratio: 0.23
Legendary retailer Macy’s is just three years away from celebrating the 100th anniversary of its famous Thanksgiving Day Parade — originally known as the Christmas Parade — in New York City. It’s no secret that the department store industry is suffering, few more than Macy’s. The brand is closing dozens of stores as part of a three-year reorganizing strategy.
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6. MetLife, Inc. (MET)
Price per Share: $50.60
P/E Ratio: 8.31
P/S Ratio: 0.71
New York-based MetLife is an insurance company that also engages in business surrounding annuities, employee benefits, and asset management. The company was originally founded by New York businessmen in 1863 under the name the National Union Life and Limb Insurance Company.
7. Tyson Foods, Inc. (TSN)
Price per Share: $66.59
P/E Ratio: 11.36
P/S Ratio: 0.56
Tyson Foods is a meat-producing conglomerate that owns brands including Tyson, Jimmy Dean, Hillshire Farm and Ball Park. Across all of them, it produces one-fifth of the beef, pork, and chicken in the United States.
Tyson, like the industry as a whole, came under intense pressure during the pandemic as slaughterhouses and meat-processing facilities became coronavirus hotspots. For shareholders, however, the moment revealed Tyson’s powerful political clout and its resilience—its stock has been on an earnings tear as of late.
8. The Kroger Co. (KR)
Price per Share: $34.56
P/E Ratio: 9.22
P/S Ratio: 0.21
Cincinnati-based grocer Kroger has a string of stores between it and its subsidiaries, which include Ralphs, Fred Meyer and King Soopers, stretching across the country. Together, it’s the largest grocery chain in the country and the third-largest retailer of any kind behind only Walmart and Amazon.
9. The Michaels Companies, Inc. (MIK)
Price per Share: $15.42
P/E Ratio: 10.28
P/S Ratio: 0.45
The Michaels Companies operates crafts retail stores that sell over 30,000 different products for decorating, framing, and arts and crafts. Unlike so many retailers that buckled under the pressure of the pandemic, Michaels adapted and adjusted. By boosting its services and e-commerce operations, it capitalized on a renewed nationwide interest in crafting from the homebound masses.
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10. Tenneco Inc. (TEN)
Price per Share: $10.35
P/E Ratio: 11.98
P/S Ratio: 0.06
Tenneco designs, builds, and sells products that cut pollution and improve performance for light vehicles, commercial trucks, and a range of other vehicles. Founded in 1987, the company operates out of Lake Forest, Ill. Currently trading for a little more than $10, individual shares are cheap, too.
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Andrew Lisa contributed to the reporting for this article.
This article was produced for informational purposes only and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Always conduct your own research and consider your investment decisions carefully.
Prices and price-ratios are subject to change at any time.
Photo note: Some images are representational.