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

We ran a screen on stocks trading under $5 for those exhibiting these trends: a falling P/E ratio (comparing the trailing-twelve-month ratio to the 3-year average) and rising EPS over the same time period.

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 undervalued? Use this list as a starting-off point for your own analysis. List sorted by market cap.

1. Tenet Healthcare Corp. (NYSE:THC): Hospitals Industry. Market cap of $2.19B. Price at $4.62. TTM P/E at 2.31 vs. 3-year average at 5.35. Last year diluted EPS at $2.01 vs. 2-year prior EPS at $0.13. This is a risky stock that is significantly more volatile than the overall market (beta = 2.2). It's been a rough couple of days for the stock, losing 8.88% over the last week.

2. JetBlue Airways Corporation (NASDAQ:JBLU): Regional Airlines Industry. Market cap of $1.19B. Price at $4.00. TTM P/E at 12.86 vs. 3-year average at 63.20. Last year diluted EPS at $0.31 vs. 2-year prior EPS at -$0.34. The stock is a short squeeze candidate, with a short float at 17.18% (equivalent to 7.87 days of average volume). It's been a rough couple of days for the stock, losing 10.31% over the last week.

3. DryShips, Inc. (NASDAQ:DRYS): Shipping Industry. Market cap of $968.48M. Price at $2.62. TTM P/E at 4.32 vs. 3-year average at 240.17. Last year diluted EPS at $0.61 vs. 2-year prior EPS at -$8.10. This is a risky stock that is significantly more volatile than the overall market (beta = 3.22). It's been a rough couple of days for the stock, losing 16.56% over the last week.

4. JA Solar Holdings Co., Ltd. (NASDAQ:JASO): Semiconductor Industry. Market cap of $542.07M. Price at $3.17. TTM P/E at 2.67 vs. 3-year average at 19.20. Last year diluted EPS at $1.68 vs. 2-year prior EPS at -$0.36. This is a risky stock that is significantly more volatile than the overall market (beta = 2.93). It's been a rough couple of days for the stock, losing 23.06% over the last week.

5. Hanwha SolarOne, Ltd. (NASDAQ:HSOL): Semiconductor Industry. Market cap of $291.31M. Price at $3.47. TTM P/E at 2.25 vs. 3-year average at 89.02. Last year diluted EPS at $0.37 vs. 2-year prior EPS at -$0.17. This is a risky stock that is significantly more volatile than the overall market (beta = 2.52). It's been a rough couple of days for the stock, losing 26.01% over the last week.

6. Air Transport Services Group, Inc. (NASDAQ:ATSG): Air Delivery & Freight Services Industry. Market cap of $282.55M. Price at $4.41. TTM P/E at 7.44 vs. 3-year average at 118.88. Last year diluted EPS at $0.62 vs. 2-year prior EPS at -$0.90. It's been a rough couple of days for the stock, losing 13.02% over the last week.

7. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD): Heavy Construction Industry. Market cap of $268.09M. Price at $4.55. TTM P/E at 14.59 vs. 3-year average at 17.62. Last year diluted EPS at $0.59 vs. 2-year prior EPS at $0.09. It's been a rough couple of days for the stock, losing 5.8% over the last week.

8. OMNOVA Solutions Inc. (NYSE:OMN): Specialty Chemicals Industry. Market cap of $209.93M. Price at $4.62. TTM P/E at 2.36 vs. 3-year average at 6.18. Last year diluted EPS at $2.40 vs. 2-year prior EPS at -$0.05. This is a risky stock that is significantly more volatile than the overall market (beta = 2.16). The stock is a short squeeze candidate, with a short float at 5.14% (equivalent to 5.7 days of average volume). It's been a rough couple of days for the stock, losing 19.65% over the last week.

9. 8x8 Inc. (NASDAQ:EGHT): Communication Equipment Industry. Market cap of $200.79M. Price at $3.21. TTM P/E at 27.83 vs. 3-year average at 43.73. Last year diluted EPS at $0.10 vs. 2-year prior EPS at -$0.04. It's been a rough couple of days for the stock, losing 13.71% over the last week.

10. SuperGen Inc. (SUPG): Drug Manufacturers Industry. Market cap of $195.77M. Price at $2.11. TTM P/E at 7.78 vs. 3-year average at 27.0. Last year diluted EPS at $0.27 vs. 2-year prior EPS at -$0.16. It's been a rough couple of days for the stock, losing 12.45% over the last week.

11. Zix Corp. (NASDAQ:ZIXI): Application Software Industry. Market cap of $188.42M. Price at $2.94. TTM P/E at 4.63 vs. 3-year average at 15.99. Last year diluted EPS at $0.61 vs. 2-year prior EPS at -$0.09. The stock is a short squeeze candidate, with a short float at 12.44% (equivalent to 8.79 days of average volume). It's been a rough couple of days for the stock, losing 14.29% over the last week.

12. Sealy Corporation (ZZ): Home Furnishings & Fixtures Industry. Market cap of $162.0M. Price at $1.65. TTM P/E at 21.81 vs. 3-year average at 363.30. Last year diluted EPS at $0.14 vs. 2-year prior EPS at -$0.03. This is a risky stock that is significantly more volatile than the overall market (beta = 2.71). The stock is a short squeeze candidate, with a short float at 15.83% (equivalent to 36.25 days of average volume). It's been a rough couple of days for the stock, losing 9.34% over the last week.

13. Gilat Satellite Networks Ltd. (NASDAQ:GILT): Communication Equipment Industry. Market cap of $153.89M. Price at $3.77. TTM P/E at 5.28 vs. 3-year average at 30.58. Last year diluted EPS at $0.73 vs. 2-year prior EPS at -$0.03. It's been a rough couple of days for the stock, losing 10.24% over the last week.

14. O2Micro International Ltd. (NASDAQ:OIIM): Semiconductor Industry. Market cap of $151.35M. Price at $4.53. TTM P/E at 11.30 vs. 3-year average at 42.66. Last year diluted EPS at $0.01 vs. 2-year prior EPS at -$0.01. It's been a rough couple of days for the stock, losing 8.48% over the last week.

15. GSI Technology Inc. (NASDAQ:GSIT): Semiconductor Industry. Market cap of $140.89M. Price at $4.88. TTM P/E at 8.16 vs. 3-year average at 11.88. Last year diluted EPS at $0.64 vs. 2-year prior EPS at $0.33. Might be undervalued at current levels, with a PEG ratio at 0.81, and P/FCF ratio at 9.89. The stock is a short squeeze candidate, with a short float at 6.45% (equivalent to 10.64 days of average volume). It's been a rough couple of days for the stock, losing 14.69% over the last week.

16. China Automotive Systems Inc. (NASDAQ:CAAS): Auto Parts Industry. Market cap of $128.61M. Price at $4.58. TTM P/E at 3.49 vs. 3-year average at 84.23. Last year diluted EPS at $1.10 vs. 2-year prior EPS at $0.46. This is a risky stock that is significantly more volatile than the overall market (beta = 2.28). It's been a rough couple of days for the stock, losing 13.75% over the last week.

17. Harvard Bioscience Inc. (NASDAQ:HBIO): Medical Instruments & Supplies Industry. Market cap of $121.08M. Price at $4.25. TTM P/E at 6.95 vs. 3-year average at 11.12. Last year diluted EPS at $0.65 vs. 2-year prior EPS at $0.17. The stock has performed poorly over the last month, losing 25.44%.

18. China Green Agriculture, Inc. (NYSE:CGA): Agricultural Chemicals Industry. Market cap of $104.45M. Price at $3.89. TTM P/E at 3.54 vs. 3-year average at 12.72. Last year diluted EPS at $0.91 vs. 2-year prior EPS at $0.53. The stock is a short squeeze candidate, with a short float at 13.86% (equivalent to 10.75 days of average volume). It's been a rough couple of days for the stock, losing 12.58% over the last week.

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

Source: 18 Cheap Stocks With Falling P/E And Earnings On The Rise