Pricey Market? These 3 Dirt-Cheap Stocks Have PE Ratios Under 12

It’s common knowledge that the market is either fully priced or even overpriced at the moment. After all, the S&P 500’s CAPE (cyclically adjusted PE) ratio, a metric invented by Yale professor Robert Schiller, is currently over 34 — its highest mark since the dot-com bubble of 1999.

However, even in 1999, there were undervalued stocks to buy that would have done well even as the internet sector fell out of favor. So are there still cheap stocks in the market today?

It appears so, as the following solid businesses miraculously all trade at 12 times their 2021 earnings estimates — or less.

Image source: Getty Images.

Discover Financial

One of the more remarkable statistics about the COVID-19 downturn is that the average consumer FICO score went up.

Huh?” you might ask. In recessions, people usually miss payments and their credit scores go down. That totally rational expectation is what sent financial stocks like credit card lender Discover Financial (NYSE:DFS) plummeting in the early days of the pandemic.

However, thanks to the stimulus bill and Federal Reserve action to backstop the economy in the early days of the pandemic, relief payments and extra unemployment insurance have allowed many to bolster their household balance sheets. If you’ve kept your job throughout this time, you’ve also likely built up lots of savings and paid down debt, since you aren’t spending a lot on travel expenses.

That’s great news for credit, and credit card companies have not yet experienced any meaningful charge-offs as a result of the pandemic. That means that many credit lenders may release reserves taken last year, bolstering their earnings in the year ahead. That’s especially true if the Biden stimulus plan released last week gets passed, and if a vaccine is rolled out in the months ahead.

Analysts are already anticipating $8.16 in 2021 EPS for Discover, nearly back to the all-time record of $9.08 earned back in 2019. That $8.12 would mean Discover trades at a 12 PE ratio. However, the highest analyst target for 2021 is $13.85. If the stimulus and vaccine rollout bring spending and lending back in a bigger way, Discover could be extremely cheap looking a year or two out, even after its impressive recovery this year.

Super Micro Computer

Believe it or not, there’s a technology stock that also trades at a forward PE ratio under 12. In fact, server manufacturer Super Micro Computer (NASDAQ:SMCI) trades at just about 10 times its earnings estimates for 2022. But keep in mind, Super Micro’s fiscal year ends in June, so fiscal 2022 is really the period between June 2021 and June 2022.

Currently, Super Micro Computer is trading at 20 times trailing earnings, but that’s a bit misleading; the company had to take on extra expenses to remediate its financial controls after an accounting scandal in 2017 led to the company being de-listed from major exchanges in 2018. However, Super Micro satisfied regulators and was relisted on the NASDAQ back in…