P/E ratios of 3 to 6?

Question

In Peter Lynch's "Beating the Street," there is the following: "My top 10 stocks in 1978 had p/e ratios of between 4 and 6, and in 1979, of between 3 and 5. When stocks in good companies are selling at 3-6 times earnings, the stockpicker can hardly lose." (page 100). Are there any stocks like this now? Every one I've looked up doesn't have a p/e ratio anywhere close to 3-6. I know p/e ratios aren't the only factor in evaluating a stock; I just want to know if I'm missing something here. Do such stocks even exist in today's market? (Just doing this for my own research; not looking to buy anything right now). Thanks!

Answer 1

There are times in history when stocks do sell at those low pe ratios and when they do that is certainly a time to pounce.  1974 was also such a time.  During such times the economic picture is worse than gloomy.  In 1979 inflation was running about 12% and Jimmy was in the White House wringing his hands.  In 1974 Tricky d**k was telling everyone that he was not a crook when everyone knew that he was and the war in Nam was at that point lost.  

The way things are currently going in another year you may have your opportunity.  GWB has blown 10 fortunes in Iraq.  His ex Fed Chairman has caused one of the worst credit crises in recent memory.  The U S is in debt upto its eyebrows with no way out and so is its population.  

Really cute.

Answer 2

PE is no reason to buy a stock period.  End of story.  All stocks are different.  A low PE means/can mean investors aren't looking at that stock.  They have probably passed it up for a better oppurtunity elsewhere.  

For instance, take Google in 2004.  It was priced at ~115 a share and the PE was 130 + !!!  Would you buy it?  Not if you are looking for low PE?  After that it climed nearly 7 fold.

Look more for EPS, Cash flow per share, ROE.  P/E can be helpful, just don't be chasing on PE alone.

Answer 3

What he means is the PEG ratio:

http://search.yahoo.com/search;_ylt=AkK8...

You can easily find it in Yahoo Finance, for example:

http://finance.yahoo.com/q/ks?s=T

Basically, the PEG indicates how much you pay for a "dollar"

Answer 4

Go here:

http://screener.finance.yahoo.com/newscr...

and run Yahoo Finance's stock screener.  You can search for low P/E stocks among other things.

PM, E, MO, BCS, UL, AIB, and many more have P/Es under 5.