This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

3 Blue-Chip Bargains

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By James Brumley

NEW YORK ( StreetAuthority) -- As investors have become more and more sophisticated, the price-to-earnings (P/E) ratio has begun to be viewed as a less-sophisticated, overly-simplistic tool. But sometimes, there's power in simplicity.

The fact of the matter is, the P/E ratio is still the ultimate "bottom line" concept -- how much are investors paying for earnings?

With this in mind, here are three great large-cap stocks that have slumped to amazingly-low P/E ratios while investors were distracted by other things. I think each represent compelling potential bargains

1. Ford (F)

To be fair, Ford Motor's earnings have been falling since 2010. The company earned $1.91 per share in 2010, but only brought home $1.51 last year. This year is expected to be even less impressive, with analysts only looking for a profit of $1.46 per share. In that light, the stock's 32% drop since the end of 2010 does make a little sense.

On the other hand, the punishment doesn't even come close to fitting the crime. Ford's P/E of 7.5 is simply rock-bottom compared to the market's average P/E of 14.2.

No, the current year doesn't look encouraging earnings wise, but it's not like Ford isn't selling more and more cars. The auto manufacturer sold 1.9 million vehicles in 2010, up 19% from 2009's total. In 2011, Ford sold a little more than 2 million cars and trucks. The year-to-date total is well ahead of the total at this point a year ago, too. The point is Ford is clearly capable of doing what it needs to do in the long run -- sell more cars.

Either way, it looks like the income-statement woes will likely clear up by next year, with forecasters saying the company will earn $1.72 per share. That translates into an overlooked forward P/E of 6.6, based on current stock prices.

2. Xerox (XRX)

Yes, people still make photocopies, and a lot of them. The market doesn't seem to believe it, considering Xerox shares are trading at a mere 8.7 times earnings. After two straight years of increased earnings, though, and another improvement in the cards this year, the argument that the copier business is dead is getting more than a little tired.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $107.72 -4.47%
FB $87.23 -2.46%
GOOG $597.79 -3.31%
TSLA $238.68 -4.20%
YHOO $31.61 -2.00%

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs