Finding undervalued stocks starts with a key metric: the price-to-earnings ratio, or PE ratio. This number is calculated by dividing a company’s stock price by its earnings per share. A lower PE ratio can suggest that the market is undervaluing the stock compared to its earnings potential.
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Another helpful measure is a company’s market capitalization, or market cap. This figure shows the total value of all a company’s shares. It can indicate how large and profitable the company is. Combining both PE ratio and market cap can give a clearer picture of whether a stock is undervalued.
Investors can also narrow their search by using a stock screener from a brokerage or finance platform. These tools filter stocks by factors like sector, valuation, and performance.
1. Comcast Corp (CMCSA) – PE Ratio: 5.30
Comcast (CMCSA) currently holds the lowest PE ratio in the S&P 500. With such a low valuation, investors may see potential for growth if market sentiment improves. The company’s diversified media and telecom business gives it a strong presence across cable, internet, and streaming.
2. Centene Corp (CNC) – PE Ratio: 6.69
Centene (CNC) operates in the healthcare sector, providing services through government-sponsored programs. A low PE ratio and stable revenue streams may make it appealing for investors looking for defensive plays during market uncertainty.
3. APA Corporation (APA) – PE Ratio: 6.86
APA (APA) is an oil and gas exploration company. Energy stocks can become undervalued during commodity price dips, creating potential entry points for long-term investors who expect energy demand to stay strong.
4. Charter Communications Inc (CHTR) – PE Ratio: 7.32
Charter (CHTR) provides broadband and cable services. Like Comcast, it has a low PE ratio and a large subscriber base, which can offer steady cash flow despite shifts in media consumption trends.
5. Devon Energy Corp (DVN) – PE Ratio: 7.46
Devon Energy (DVN) is another major player in oil and gas. Its relatively low PE ratio, combined with potential upside in energy prices, makes it one to watch for those seeking exposure to the energy sector.
Why Undervalued Stocks Matter in Volatile Markets
Undervalued stocks often attract more attention when market volatility rises. Companies with strong cash flow and solid balance sheets can weather downturns, making their discounted prices even more appealing.
However, undervalued stocks are not always guaranteed winners. A low PE ratio could reflect real challenges in the business. That’s why it’s important to research the company, understand its industry, and know why you’re buying before investing. This is why using tools like the TipRanks Stocks Comparison Tool is useful. You can compare key metrics on various stocks side-by-side, such as the P/E ratio, which helps you identify undervalued companies.
