Here Are the 10 Cheapest Stocks in the S&P 500

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There are inactive plentifulness of inexpensive stocks, adjacent with the large indexes adjacent grounds highs.

Barron’s screened the S&P 500 scale and identified the 10 stocks with the lowest price-to-earnings ratios utilizing 2022 nett projections, based connected FactSet data.

The 10 slightest costly companies see memory-chip makers Micron Technology (ticker: MU) and Western Digital (WDC), chemic shaper LyondellBasell Industries (LYB), and beingness insurer Lincoln National (LNC). Nine of the 10 person P/E ratios beneath six. Lyondell has the highest aggregate successful the group, astatine 6.5 times estimated 2022 earnings.

The different six stocks are drugmakers Viatris (VTRS) and Organon (OGN); lipid and state producers Diamondback Energy (FANG) and APA (APA), formerly Apache; location builder PulteGroup (PHM), and insurer Unum (UNM).

Several of the stocks person had large gains implicit the past year, including Diamondback, Micron, and Lincoln National, but each stay inexpensive based connected earnings.

Company / TickerRecent PriceMarket Value (bil)1-Yr Price Change2022E* P/E Ratio
Viatris / VTRS$14.82$17.9-10.8%3.9
Unum Group / UNM26.145.338.84.8
Diamondback Energy / FANG69.8012.656.85.2
Western Digital / WDC61.0718.773.05.5
APA / APA16.686.34.35.6
PulteGroup / PHM52.4313.612.15.6
Organon / OGN33.618.5N/A5.7
Lincoln National / LNC66.8712.579.65.8
Micron Technology / MU70.6079.559.65.9
LyondellBasell Industries / LYB100.3633.543.86.5

*P/E ratio based connected calendar 2022 estimates; E=estimate; N/A=not applicable

Source: FactSet

Why are the stocks truthful inexpensive?

Some similar Viatris and Organon person ample, but manageable debt. Investors fearfulness that profits whitethorn beryllium peaking astatine companies similar Micron, Lyondell, and Western Digital.

These concerns could beryllium creating opportunities for investors. Micron, whose shares commercialized astir $70, precocious initiated a tiny dividend resulting successful an 0.6% yield. J.P. Morgan expert Harlan Sur wrote earlier this period that helium expected Micron and its rivals to beryllium “disciplined and prudent” astir adding proviso successful the look of beardown demand. He has an Overweight standing and a $140 terms people connected the stock.

Western Digital, astatine astir $61, is simply a starring shaper of flash memory. Morgan Stanley expert Joseph Moore is upbeat connected its prospects, giving the banal an Overweight standing and a $88 terms target. He thinks the banal is excessively inexpensive fixed that helium expects net of $10 a stock adjacent year.

Organon, a Merck (MRK) spinoff that has a portfolio of off-patent drugs and a women’s wellness business, precocious reported better-than-expected earnings. It has acceptable an $1.12 yearly dividend, for a 3.3% output astatine a caller terms of $33.50.

Joe Cornell, the steadfast of Spin-Off Research, has a Buy standing and a $45 terms people connected the stock. Organon has a “peer-leading” yield, helium precocious wrote, and imaginable “top-line maturation and borderline momentum implicit the medium-term.”

Viatris, a generic drugmaker spun disconnected from Pfizer (PFE), has the lowest P/E successful the S&P 500 astatine 3.9. Its shares precocious traded beneath $15.

J.P. Morgan expert Chris Schott was encouraged by the company’s second-quarter net report, but maintained a Neutral standing arsenic helium awaits much grounds of improving fiscal show aft a pugnacious 2020. The banal has a 3% yield.

Energy stocks person experienced a crisp pullback since June 1 due to the fact that of a driblet successful lipid prices and a sentiment displacement distant from the sector.

Diamondback Energy, a starring exploration and accumulation institution successful the Permian basin successful Texas, has seen its shares driblet to a caller $70 from $100. The institution reported beardown second-quarter results and boosted its dividend by 12.5% to an annualized $1.80 a share. The banal present yields astir 2.6%.

Like galore E&Ps, Diamondback has a precocious free-cash travel yield. J.P. Morgan expert Arun Jayaram is upbeat connected Diamondback and precocious estimated its nett plus worth astatine $126 a share. APA produces lipid and state successful the U.S. and overseas and offers a play connected a perchance ample offshore lipid tract disconnected Suriname successful South America. Its shares commercialized astir $16.

Shares of PulteGroup, 1 of the largest U.S. location builders, person pulled backmost astir 20% from a outpouring peak, to a caller $52 amid concerns astir request and pricing power.

 Evercore ISI expert Stephen Kim, 1 of the astir bullish Wall Street analysts connected the sector, sees rising profitability for Pulte and peers. He has an Outperform standing connected Pulte and a $93 terms target. He sees astir $8 a stock successful net this twelvemonth and an above-consensus estimation of astir $12 adjacent year.

Lyondell, the world’s third-largest autarkic chemic company, is simply a large subordinate successful plastics. Its shares precocious traded astir $100. Its CEO, Bob Patel, precocious told Barron’s Jack Hough: “Whether we’re astatine peak, and is determination a moderation oregon a hard reset—this is astatine the bosom of the statement contiguous with investors. I deliberation determination is beardown request successful beforehand of us.”

Lincoln National, which offers beingness insurance, annuities, and different fiscal products, precocious traded astir $67, little than six times projected 2022 net and beneath a blimpish measurement of publication worth of $75. J.P. Morgan expert Jimmy Bhullar likes Lincoln National, precocious citing an “improving concern mix” and “discount valuation.” He has an Overweight standing and a $81 terms target.

Unum, a supplier of beingness and disablement insurance, trades cheaply based connected net and publication value. That reflects successful portion concerns astir its semipermanent attraction security reserves, which were strengthened successful 2020. The stock, astir $26, trades for astir 5 times projected 2022 net and for fractional of publication value.

Write to Andrew Bary astatine andrew.bary@barrons.com

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