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When a company holds a high P/E Ratio this illustrates that investors have high expectations relative to a firm’s earnings growth potential. By the same token, when a firm has a low P/E Ratio (X<10) this demonstrates that investors have low earnings expectations of the firm. In its most simple form, this ratio is telling someone how much investors are willing to pay currently for every dollar’s worth of earnings from a company.

We ran a screen for financial firms that appear cheap relative to their P/E Ratio (X<10). From this narrowed pool, we then screened for companies that had strong profitability (X>10).

The list is ranked from highest to lowest by the P/E Ratio.

1. American Capital Ltd (NASDAQ:ACAS)

Sector

Financial Services

Industry

Asset Management

Market Cap

$2,696M

Beta

2.53

This is a venture capital & private equity firm. The firm's P/E Ratio is 1.97. ACAS’s 1-Year Fiscal Operating Margin is 34.00%. The short interest is 1.40% as of 08/15/2011.

2. American International Group (NYSE:AIG)

Sector

Financial Services

Industry

Insurance - Diversified

Market Cap

$41,357M

Beta

3.99

The company deals with a variety of insurance and insurance-related activities all over the world. The firm’s P/E Ratio is 2.23. AIG’s 1-Year Fiscal Operating Margin is 23.20%. The short interest is 17.20% as of 08/15/2011.

3. Allied World Assurance Company (NYSE:AWH)

Sector

Financial Services

Industry

Insurance - Property & Casualty

Market Cap

$ 1,925M

Beta

0.38

The company underwrites and manages a diversified portfolio of property and casualty insurance and reinsurance business. The firm’s P/E Ratio is 4.86. AWH’s 1-Year Fiscal Operating Margin is 36.61%. The short interest is 2.60% as of 08/15/2011.

4. Protective Life Corp (NYSE:PL)

Sector

Financial Services

Industry

Insurance - Life

Market Cap

$ 1,463M

Beta

3.37

The company offers insurance and investment products. The firm’s P/E Ratio is 4.89. PL’s 1-Year Fiscal Operating Margin is 12.55%. The short interest is 3.10% as of 08/15/2011.

5. Hartford Financial Services Group (NYSE:HIG)

Sector

Financial Services

Industry

Insurance - Diversified

Market Cap

$ 7,590M

Beta

3.45

The company offers insurance and financial services company. The firm’s P/E Ratio is 5.46. HIG’s 1-Year Fiscal Operating Margin is 12.10%. The short interest is 4.60% as of 08/15/2011.

6. Lincoln National Corp (NYSE:LNC)

Sector

Financial Services

Industry

Insurance - Life

Market Cap

$ 5,865M

Beta

2.77

The company operates multiple insurance and investment management businesses. The firm’s P/E Ratio is 5.55. The firm’s 1-Year Fiscal Operating Margin is 11.86%. The short interest is 3.10% as of 08/15/2011.

7. Reinsurance Group of America (NYSE:RGA)

Sector

Financial Services

Industry

Insurance - Reinsurance

Market Cap

$ 3,548M

Beta

1.22

The company offers insurance and financial reinsurance. The firm’s P/E Ratio is 5.76. The firm’s 1-Year Fiscal Operating Margin is 10.46%. The short interest is 1.10% as of 08/15/2011.

8. Janus Capital Group, Inc.(NYSE:JNS)

Sector

Financial Services

Industry

Asset Management

Market Cap

$1,114M

Beta

2.85

The company offers investment management services. The firm’s P/E Ratio is 6.13. The firm’s 1-Year Fiscal Operating Margin is 27.72%. The short interest is 3.60% as of 08/15/2011.

9. Apollo Investment Corp (NASDAQ:AINV)

Sector

Financial Services

Industry

Asset Management

Market Cap

$ 1,589M

Beta

1.87

The company operates as a closed-end management investment firm and does business development. The firm’s P/E Ratio is 6.16. The firm’s 1-Year Fiscal Operating Margin is 53.28%. The short interest is N/A as of 08/15/2011.

We hope this list helps as investors do their own due diligence on financial stocks that appear cheap and profitable.

Source: 9 Cheap, Overlooked Financial Stocks With Strong Profitability