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When a company’s P/E ratio has fallen over time, while earnings steadily rise, it could be a sign that price has not proportionately increased with earnings. In other words, the earnings may not be fully priced into the stock, and the stock may be undervalued...

We ran a screen on large cap companies exhibiting this behavior, with trailing twelve month P/E (excluding extraordinary items) at least 20% lower than the 3-year average. These companies also had at least 10% growth in diluted EPS (excluding extraordinary items) year-over-year for the past two years.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



Do you think these stocks are fairly priced? Use this list as a starting-off point for your own analysis.

List sorted by market cap.

1. Apple Inc. (NASDAQ:AAPL):
Personal Computers Industry. Market cap of $291.59B. TTM P/E at 15.03 vs. 3-year average at 18.48. Last year diluted EPS at $15.15 vs. two years prior EPS at $5.36. The stock has gained 16.71% over the last year.

2. JPMorgan Chase & Co. (NYSE:JPM): Money Center Banks Industry. Market cap of $160.85B. TTM P/E at 8.99 vs. 3-year average at 16.55. Last year diluted EPS at $3.96 vs. two years prior EPS at $0.81. The stock has gained 5.12% over the last year.

3. Google Inc. (NASDAQ:GOOG):
Internet Information Providers Industry. Market cap of $156.16B. TTM P/E at 18.82 vs. 3-year average at 25.38. Last year diluted EPS at $26.31 vs. two years prior EPS at $13.31. The stock has lost 0.81% over the last year.

4. The Coca-Cola Company (NYSE:KO):
Beverages Industry. Market cap of $150.70B. TTM P/E at 12.73 vs. 3-year average at 17.16. Last year diluted EPS at $5.06 vs. two years prior EPS at $2.49. The stock has gained 29.1% over the last year.

5. Wells Fargo & Company (NYSE:WFC):
Money Center Banks Industry. Market cap of $142.54B. TTM P/E at 11.12 vs. 3-year average at 17.54. Last year diluted EPS at $2.21 vs. two years prior EPS at $0.70. The stock has lost 2.64% over the last year.

6. Toyota Motor Corp. (NYSE:TM): Auto Manufacturers Industry. Market cap of $138.14B. TTM P/E at 24.70 vs. 3-year average at 50.94. Last year diluted EPS at $1.62 vs. two years prior EPS at -$1.74. The stock has gained 11.51% over the last year.

7. Siemens AG (SI): Telecom Services Industry. Market cap of $119.83B. TTM P/E at 13.51 vs. 3-year average at 19.75. Last year diluted EPS at $6.45 vs. two years prior EPS at $2.72. The stock has gained 40.09% over the last year.

8. China Petroleum & Chemical Corp. (NYSE:SNP): Independent Oil & Gas Industry. Market cap of $80.44B. TTM P/E at 7.32 vs. 3-year average at 9.72. Last year diluted EPS at $0.13 vs. two years prior EPS at $0.05. The stock has gained 16.25% over the last year.

9. Honda Motor Co., Ltd. (NYSE:HMC):
Auto Manufacturers Industry. Market cap of $65.97B. TTM P/E at 9.87 vs. 3-year average at 15.79. Last year diluted EPS at $3.69 vs. two years prior EPS at $0.94. The stock has gained 19.88% over the last year.

10. Visa, Inc. (NYSE:V): Business Services Industry. Market cap of $61.47B. TTM P/E at 18.97 vs. 3-year average at 30.49. Last year diluted EPS at $3.54 vs. two years prior EPS at $0.91. The stock has lost 7.77% over the last year.

11. Teva Pharmaceutical Industries Limited (NYSE:TEVA): Drug Manufacturers Industry. Market cap of $44.06B. TTM P/E at 12.59 vs. 3-year average at 23.17. Last year diluted EPS at $3.66 vs. two years prior EPS at $0.78. The stock has lost 9.67% over the last year.

12. Eli Lilly & Co. (NYSE:LLY): Drug Manufacturers Industry. Market cap of $43.48B. TTM P/E at 8.53 vs. 3-year average at 17.28. Last year diluted EPS at $4.58 vs. two years prior EPS at -$1.89. The stock offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 5.22%, current ratio at 2.01, and quick ratio at 1.64. The stock has gained 14.3% over the last year.

13. National Grid plc (NYSE:NGG): Gas Utilities Industry. Market cap of $33.57B. TTM P/E at 9.35 vs. 3-year average at 12.73. Last year diluted EPS at $1.04 vs. two years prior EPS at $0.52. The stock has gained 34.04% over the last year.

14. Mastercard Incorporated (NYSE:MA): Business Services Industry. Market cap of $32.57B. TTM P/E at 18.15 vs. 3-year average at 27.87. Last year diluted EPS at $14.05 vs. two years prior EPS at -$1.95. The stock has gained 21.19% over the last year.

15. Target Corp. (NYSE:TGT): Discount, Variety Stores Industry. Market cap of $32.56B. TTM P/E at 11.52 vs. 3-year average at 13.97. Last year diluted EPS at $4.00 vs. two years prior EPS at $2.86. The stock has lost 8.96% over the last year.

*P/E and EPS data sourced from Screener.co, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 15 Large Caps With Falling Premiums, Rising Earnings Growth