I thought about checking how many of the more or less 300 stocks have a Price-to-Earnings (P/E) ratio less than 20. From that filtered list, I wanted to see the top 10 stocks with the biggest negative price change year-to-date (YTD). The data I used is as of market closing on August 25, 2023.
Before I show you the list, I’d like to make it clear that sharing the list with you is not the same as recommending the stocks to you.
I have a proprietary way of identifying stocks that should be added in my watchlist. In short, this filtering I did isn’t the complete recipe.
Well, at least, there’s something you can start with.
If you want to have a one-on-one mentoring session with me to know my complete methodology, you’re welcome to fill out this form to avail yourself of my stock investment consultancy service.
What’s the Ideal Price-to-Earnings Ratio?
One of the frequently asked questions about the price-to-earnings ratio is this, “What’s the ideal P/E ratio?”
The ideal Price-to-Earnings ratio for stocks is not a fixed or universal value. It is a valuation metric that compares a company’s stock price to its earnings per share (EPS).
It is often used as an indicator of how expensive or cheap a stock is relative to its earnings potential. A higher price-to-earnings ratio generally suggests that investors are willing to pay more for each unit of earnings, indicating a higher expectation for future growth.
The “ideal” price-to-earnings ratio can vary widely depending on factors such as the industry, growth prospects, economic conditions, interest rates, and market sentiment.
Here are some general guidelines:
- Growth Stocks: Companies with high growth potential, especially in technology or innovative industries, tend to have higher price-to-earnings ratios. For rapidly growing companies, a price-to-earnings ratio might be high due to high expected future earnings.
- Stable Dividend Stocks: Established companies in mature industries with stable earnings and dividends may have lower P/E ratios. Investors might be more interested in the consistent dividends rather than rapid growth.
- Cyclical Stocks: Companies in cyclical industries (those heavily affected by economic cycles, like construction or automotive) might have varying P/E ratios depending on the phase of the economic cycle.
- Market Conditions: During bullish markets or periods of high investor optimism, price-to-earnings ratios can be elevated as investors are willing to pay more for future earnings. Conversely, during bearish markets or economic uncertainty, P/E ratios may be lower. That goes without saying because your numerator, which is the prevailing price of the stock, is a lot less during the bearish market. One-hundred divided by two is 50. Ninety divided by two is 45. The lower the current price of the stock, the lower the P/E ratio.
- Interest Rates: Lower interest rates can make stocks relatively more attractive compared to bonds or other fixed-income investments, potentially leading to higher price-to-earnings ratios.
- Comparable Analysis: It’s often more meaningful to compare a company’s P/E ratio to those of its peers in the same industry rather than looking for a single “ideal” value.
Ultimately, the ideal price-to-earnings ratio depends on an investor’s individual preferences, risk tolerance, investment horizon, and market outlook. It’s important to use the P/E ratio as just one of many factors when evaluating a stock’s attractiveness. Additionally, considering other metrics, such as the company’s growth prospects, profitability, debt levels, and competitive positioning, is crucial for making informed investment decisions.
Why Did I Filter According to PE of Less Than 20?
Actually, I’m already idealistic with that limit of 20 for the price-to-earnings. Some analysts would even adjust that up to 25. But, just out of curiosity, I set it to P/E 20.
I set the limit to P/E 20 because I want to see which Philippine stocks are not yet overbought relative to their P/E with a limit of 20.
Why Did I Filter According to Biggest Negative YTD Price Change?
The deeper the negative YTD price change, the higher the potential reward once a confirmed buy signal is spotted.
I repeat: “…once a confirmed buy signal is spotted.”
I had to reiterate that because some readers have a confirmation bias. They don’t take my whole sentence but only the first half of it regardless of whether I write in the active or passive voice.
How do I know if there’s a selling exhaustion already? I can teach you that in an exclusive one-on-one online masterclass. Complete this form to avail of my stock investment consultancy service.
Top 10 PSE-Listed Stocks With PE < 20 and Biggest Negative YTD Price Change
Rank: 10
Stock Code: CNVRG
P/E: 8.07
Company: Converge Information and Communications Technology Solutions, Inc.
YTD: -45.65%
Rank: 9
Stock Code: ABA
P/E: 2.09
Company: AbaCore Capital Holdings, Inc.
YTD: -43.75%
Rank: 8
Stock Code: DELM
P/E: 16.71
Company: Del Monte Pacific Limited
YTD: -42.29%
Rank: 7
Stock Code: JOH
P/E: 5.95
Company: Jolliville Holdings Corporation
YTD: -39.44%
Rank: 6
Stock Code: RLT
P/E: 11.38
Company: Philippine Realty and Holdings Corporation
YTD: -38.07%
Rank: 5
Stock Code: FILRT
P/E: 8.94
Company: Filinvest REIT Corp.
YTD: -38.00%
Rank: 4
Stock Code: ELI
P/E: 2.27
Company: Empire East Land Holdings, Inc.
YTD: -36.17%
Rank: 3
Stock Code: INFRA
P/E: 1.21
Company: Philippine Infradev Holdings, Inc.
YTD: -34.78%
Rank: 2
Stock Code: ACEN
P/E: 13.32
Company: Acen Corporation
YTD: -33.46%
Rank: 1
Stock Code: ALLHC
P/E: 12.70
Company: AyalaLand Logistics Holdings Corp.
YTD: -31.65%
Which Stocks From This List Are in Your Watchlist?
What are the other metrics you considered that made you add them in your watchlist? Let’s discuss in the comment section below.
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