6 Value Stocks That Are Too Cheap to Be Ignored

InvestorPlace – Stock Market News, Stock Advice & Trading Tips Investors should not ignore value stocks any longer.

United States Steel ( X ): This steel producer trades at 75% of its tangible book value, pays a 0.8% dividend, and trades for 2 times forward earnings.

Olympic Steel ( ZEUS ): Another steelmaker trading at 96% of tangible book value, 4x forward earnings with a 0.6% yield.

LyondellBasell Industries ( LYB ): This chemical company trades on a 6x forward P/E ratio, good growth, and a 4.10% yield.

Avnet ( AVT ): This electronics distributor has a 6.8 forward P/E, good earnings growth, and a 2.23% dividend yield.

Northrim BanCorp ( NRIM ): This midcap Alaskan bank has an 8.6x P/E, a 3.93% dividend yield, and has consistently raised its dividend over the past 12 years.

First Financial ( THFF ): This Midwest bank trades for just 125% over its tangible book value, 8.5x forward P/E, and a 2.49% dividend yield.

Source: Shutterstock

Sometimes the best time to buy downtrodden stocks is when they are falling, even though they are already cheap. And these six value stocks are so cheap per their value metrics, like price-to-earnings (P/E) and price-to-book value (P/BV) that they are too low even for most value investors. Traditionally, value investing involves picking stocks near their lows in terms of the price-to-asset ratios, or low P/E ratios. So I think investors should pick up these bargain stocks now while they’re cheap despite the risk that their price might fall further. Click to Enlarge Source: Mark R. Hake, CFA

Additionally, these stocks also all pay dividends, which affords investors the ability to get paid while they wait for their prices to rise.

The cheapest of these stocks trades at just 2x forward earnings projections. The chart on the right shows the ranking of these six stocks by P/E.

Let’s dive in and look at these six value stocks: United States Steel (X)

Source: Shutterstock Market Capitalization: $6.2 billion

United States Steel (NYSE: X ) is a flat-rolled and tubular steel maker that is too cheap. It trades at 75% of tangible book value and just 2 times forward earnings, according to Refinitiv’s survey of analysts (seen on Yahoo Finance’s statistics tab ).

This is due to the market’s overzealous worry about a worldwide slump in economic activity including steel products. The worst of the future bad news is already in the stock price.

However, the problem is that the company is not in bad financial shape. For example, its debt-to-equity ratio is only 43% (again on the Yahoo Finance stats page), and its free cash generation is still positive. In fact, in the last quarter (Q1), U.S. Steel made $771 million in cash flow from operations (CFFO). After deducting $349 million in capital expenditure (capex) spending, it still made free cash flow (FCF) of $422 million.

That means that its cash balance won’t keep falling, and more importantly, its FCF ratio is now very attractive at 27.2% (i.e., ($422 x4)/$6.2b). That is a huge FCF yield. Its dividend yield of 0.82% and the repurchase of $122 million of its stock in Q1 make X stock one of the best value stocks. Olympic Steel (ZEUS)

Source: Shutterstock Market Cap: $363.6 million

Olympic Steel (NASDAQ: ZEUS ) is an Ohio-based steel producer like U.S. Steel. It is cheap as well. It trades for just 4.1 times forward earnings and just 96% of its tangible book value. Moreover, the stock pays a slightly higher yield at 0.64%.However, Olympic Steel has a higher debt-to-equity ratio of over 73% and also is generating negative FCF. That makes its cheap valuation somewhat suspect. For example, if it keeps burning through cash like this it will have to sell assets or borrow more money, or even raise equity.For that reason, this might now be as good a value stock as United States Steel but it is still “statistically cheap” in terms of its typical value-based metrics. LyondellBasell Industries (LYB) Source: Flagmania / Shutterstock.com Market Cap: $35.3 billion LyondellBasell Industries (NYSE: LYB ) is a Houston-based global chemical producer. The attraction to this stock is that it trades on a 6x forward P/E ratio, has good earnings growth, and has a 4.10% dividend yield. For example, earnings per share (EPS) are forecast to rise from $16.80 this year to $16.98 next year .However, the company’s financial position is not particularly exciting. Its debt-to-equity ratio is over 100%, meaning that debt exceeds its equity (i.e., debt is greater than assets by the amount […]

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