Please try another search
Worries over sky-high inflation and the U.S. Federal Reserve’s aggressive plans to hike interest rates have been the primary driver of market sentiment this year.
So all eyes will be on today's consumer price index report and the Fed’s annual Jackson Hole symposium on August 25 when it is expected to increase rates another 75 basis points.
Rising interest rates tend to dent high-growth stocks with high price-to-earnings (PE) ratios so here are three stocks with relatively low price-to-earnings ratios poised to outperform in the months ahead.
Philip Morris (NYSE:PM) is the world’s biggest tobacco company based on net sales. Its most recognized and best-selling product is the Marlboro brand.
We think shares of the New York-based company are a solid pick as high-quality blue-chip dividend stocks with relatively down-to-earth valuations tend to outperform in an inflationary environment.
The ‘Big Tobacco’ company, which trades at a PE ratio of 16.7 and has a yield of 5.12%, reported second-quarter earnings and revenue which far exceeded expectations, driven by the continued strength of its non-combustible IQOS smoke-free heated tobacco device.
It also raised its full-year profit guidance and now expects it to increase of 10%-12% year-on-year (yoy) due to further progress on operating cost efficiencies.
Per an Investing.com survey, eight analysts rate PM a ‘buy’, seven consider it a ‘hold’ and the stock has roughly 15% upside potential.
The quantitative models in InvestingPro points to a gain of about 11.3% from current levels, bringing PM closer to its fair value of $108.34.
Dow Inc (NYSE:DOW), which was spun off from DowDuPont in 2019, is one of the world’s largest commodity chemical producers. It provides a wide range of products, including plastics, coatings, and silicones, to customers in market segments, such as packaging, infrastructure, and consumer applications.
After climbing to a record peak of $71.86 on April 21, DOW fell rapidly to a low of $48.27 on July 14 amid worries over a slowing global economy. The shares have since staged a modest rebound, rising by 9% in the last four weeks.
With a PE ratio below 6, DOW comes at a substantial discount when compared to other notable chemical companies, such as Air Products and Chemicals (NYSE:APD), and DuPont (NYSE:DD), which trade at 26 times and 25 times forward earnings, respectively.
On July 21, Dow delivered better-than-expected Q2 results easing fears that demand for its products might be slowing.
As part of its constant effort to return capital to investors, in Q2 it completed an $800 million share buyback and paid $505 million in dividends. The shares have a yield of 5.37%, one of the highest in the sector.
According to an Investing.com survey, 20 out of 23 analysts rate the stock ‘outperform’ or ‘hold’, with an average price target of around $60.
The average fair value on InvestingPro is $77.59, implying around 47% upside.
Chesapeake Energy (NASDAQ:CHK), which emerged from bankruptcy in February 2021, has been a standout performer in the booming energy sector this year, reaping the benefits of higher natural gas prices.
Shares of the Oklahoma City, Oklahoma-based fracking company have jumped by approximately 52% in 2022, far outpacing the Dow Jones Industrial Average and the S&P 500.
CHK stock's all-time high is $105 reached on May 31 this year but despite a strong year-to-date performance, it remains worth owning due to its ongoing efforts to return excess cash to shareholders.
The energy company, which posted triple-digit yoy growth in Q2 profit and revenue, boosted its annual dividend 10%, thanks to its increasing free cash flow and rapidly improving balance sheet. It now offers a sky-high yield of 10%. The company also recently doubled its stock buyback program to $2 billion.
Chesapeake has a comparatively low PE of 7.8, compared to other prominent names in the oil & gas space including EOG Resources (NYSE:EOG), Pioneer Natural Resources (NYSE:PXD), and Continental Resources (NYSE:CLR).
Most analysts remain generally bullish as per an Investing.com survey, which revealed that 12 out of 14 rate it as a ‘buy’ with an average price target of $127.54.According to the Investing Pro model, it has a fair value of $116.38.
Disclaimer: At the time of writing, Jesse had a position in CHK shares. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
If you had been following the S&P 500 closely this past week, it likely would have left you scratching your head if you were trying to align the news with the market action. For...
The Russell 2000 (IWM) has been defending its 50-day MA over the early part of 2024, but the last few days have seen a shift in this support with 'sell' triggers in the MACD and...
Consumer instinct is a wonderful attribute to have and is generally talked about when considering stocks to buy.What Is the “Consumer Instinct”? “Peter Lynch is one of the most...
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.