Here are the 10 cheapest mid-cap stocks
The steel, homebuilding and insurance sectors lead the very low-priced stocks of the S&P Midcap 400 Index.
Barron sifted through the index using FactSet data for the 10 stocks with the lowest price-to-earnings ratios based on projected earnings in 2022. Lowest P / E’s ranged from three to 6.5 .
The list includes steel manufacturers
(ticker: X) and
(CLF); home builders
Taylor Morrison Home
Tri Pointe Houses
(TPH) and insurers
The other three actions are
Many investors view cheap stocks as damaged property in a growth-driven stock market, but cheap stocks can offer a margin of safety and considerable upside potential if sentiment changes. The rally in energy exploration and production stocks of late has been a case in point.
|Company / Teleprinter||Recent price||Market value (bill)||2022E P / E|
|Brighthouse Financial / BHF||$ 41.11||$ 3.4||3.0|
|American Steel / X||21.50||5.8||3.4|
|Taylor Morrison Home / THMC||26.25||3.3||4.0|
|Unum / UNM Group||23.47||4.8||4.4|
|Tri Pointe / TPH houses||21.62||2.4||5.2|
|Cleveland-Cliffs / CLF||19.83||9.9||5.5|
|Home KB / KBH||40.69||3.7||5.6|
|Steel dynamics / STLD||57.80||11.8||6.2|
|Dana / DAN||20.92||3.0||6.4|
|Chemours / CC||27.08||4.5||6.5|
E = estimate
Homebuilders and steelmakers now have some of the lowest P / E ratios in the stock market as investors fear robust conditions in both sectors will not last.
Hot-rolled steel prices have more than tripled to reach $ 1,900 per tonne last year on strong global demand, government pressure to cut emissions in China’s steel industry and a scarcity of scrap metal which is used as an input by many steel manufacturers.
Steelmakers get a bonus and reduce their debts, buy back shares and make new investments. The Bulls argue that the underlying profitability of the industry has increased even assuming a drop in record steel prices.
US Steel, at $ 21.50 recently, is trading for just 3.4 times projected profits in 2022. Wall Street was not thrilled recently that the company was considering spending $ 3 billion on a new steel plant – some investors would prefer see returns on capital for holders.
Cleveland-Cliffs, at $ 19.80, reports 5.5 times 2022 profits and uses its huge 2021 profits to reduce debt and buy back stocks. Credit Suisse analyst Curt Woodworth called the company a “free cash flow machine” and has an outperformance rating and price target of $ 34. Steel Dynamics, at around $ 58, is trading for 6.2 times estimated earnings in 2022. It recently said it expects almost $ 5 a share in third-quarter earnings.
KB Home, which is trading at around $ 41, is a leading homebuilder and is trading for just 5.6x earnings. Investors fear that the company’s home deliveries and margin will fall short of expectations in the August quarter.
Evercore ISI analyst Stephen Kim considers the impact of these issues to be modest. It has an outperformance rating and projects that KB could earn almost $ 10 per share in its 2022 fiscal year ending next November.
Mid-size home builders like Taylor Morrison and Tri Pointe are even cheaper than KB. Taylor Morrison, recently around $ 26, is trading for four times 2022 earnings for a small premium over book value, while Tri Pointe, at around $ 22, recovers just over five times earnings over time. .
JP Morgan analyst Michael Rehaut wrote after Taylor Morrison’s quarterly results in June that investors were overly concerned about the sustainability of housing demand. He has an overweight rating and a target price of $ 45.
Brighthouse Financial, a spin-off company of
(MET), is a major provider of annuities and its shares, at around $ 41, are trading for only three times the estimate. 2022 results and for a fraction of the book value. Unum, at around $ 23, is one of the leading providers of disability insurance. It is trading for just over four times the projected profits in 2022.
Dana, an automotive supplier, is turning to electric vehicles like the rest of the industry. Its shares, at around $ 21, are trading at just over six times projected earnings in 2022. Chemours is a manufacturer of titanium dioxide and other chemicals. Its shares at around $ 27 are trading for 6.5 times projected earnings in 2022.
Write to Andrew Bary at [email protected]