10 Cheap, Profitable Stocks That Are Still Beating The Market

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Includes: AMGN, APOL, DCM, ELN, IDA, IMO, NDAQ, PTEN, ROC, VOD
by: Follow My Alpha

For some stocks, 2011 just hasn't been their year. It's been a brutal environment where names sometimes merely get pulled lower because of systemic market risk. Still, that's no reason not take advantage of the situation at hand. We've identified a few names that have underperformed the market year-to-date but are still worth reviewing because of their strong bottom line profitability and the cheap price-multiple valuations they now carry. The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a company that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability.

The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the company relative to future earnings growth. By the opposite token, investors generally have lower expectations of a company with a low P/E ratio. A company that holds a P/E ratio below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.

We first looked for stocks that are trading at a discount (P/E<12) & have strong bottom line profitability (Net Margin[TTM]>10%). From this narrowed list of candidates, we then looked for companies that have underperformed the S&P 500 year-to-date. We did not screen out any sectors or market caps.

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

1. NTT DoCoMo, Inc. (NYSE:DCM)

Sector

Commun Services

Industry

Telecom Services

Market Cap

$73,273M

Beta

0.22

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The company NTT DOCOMO, Inc. provides wireless telecommunications services, packet communications services, and satellite mobile communications services in Japan. DCM has a P/E of 11.95& a net margin [TTM] of 11.43%. The stock has increased 3.14% YTD. The short interest was N/A as of 10/14/2011.

2. Apollo Group Inc. (NASDAQ:APOL)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$6,169M

Beta

0.64

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The company Apollo Group, Inc., through its subsidiaries, provides online and on-campus educational programs and services at the undergraduate, master's, and doctoral levels. APOL has a P/E of 11.75 & a net margin[TTM] of 12.09%. The stock has increased 19.63% YTD. The short interest was N/A as of 10/14/2011.

3. Vodafone Group PLC. (NASDAQ:VOD)

Sector

Commun Services

Industry

Telecom Services

Market Cap

$141,002M

Beta

0.62

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The company Vodafone Group Plc provides mobile communications services in Europe, the Middle East, Africa, the Asia Pacific and the United States. VOD has a P/E of 11.53 & a net margin[TTM] of 17.37%. The stock has increased 9.23% YTD. The short interest was N/A as of 10/14/2011.

4. Amgen Inc. (NASDAQ:AMGN)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$50,982M

Beta

0.62

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The company Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. AMGN has a P/E of 11.47 & a net margin[TTM] of 29.72%. The stock has increased 1.00% YTD. The short interest was 2.30% as of 10/14/2011.

5. Imperial Oil Ltd. (NYSEMKT:IMO)

Sector

Energy

Industry

Oil & Gas Integrated

Market Cap

$35,091M

Beta

0.95

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The company Imperial Oil Limited engages in the exploration, production, and sale of crude oil and natural gas in Canada. IMO has a P/E of 11.38 & a net margin[TTM] of 10.72%. The stock has increased 3.01% YTD. The short interest was 1.80% as of 10/14/2011.

6. Patterson-UTI Energy, Inc. (NASDAQ:PTEN)

Sector

Energy

Industry

Oil & Gas Drilling

Market Cap

$3,306M

Beta

1.76

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The company Patterson-UTI Energy, Inc., through it subsidiaries, provides onshore contract drilling services to oil and natural gas operators. PTEN has a P/E of 11.38 & a net margin[TTM] of 13.67%. The stock has decreased by -0.74% YTD. The short interest was 4.70% as of 10/14/2011.

7. Idacorp, Inc. (NYSE:IDA)

Sector

Utilities

Industry

Utilities - Regulated Electric

Market Cap

$2,012M

Beta

0.39

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The company IDACORP, Inc., through its subsidiary, Idaho Power Company, engages in the generation, transmission, distribution, sale, and purchase of electric energy in the United States. IDA has a P/E of 11.22 & a net margin[TTM] of 17.32%. The stock has increased 12.57% YTD. The short interest was 4.00% as of 10/14/2011.

8. Elan Corp PLC. (NYSE:ELN)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$6,991M

Beta

1.07

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The company Elan Corporation, plc operates as a neuroscience-based biotechnology company primarily in Ireland and the United States. ELN has a P/E of 11.19 & a net margin[TTM] of 49.01%. The stock has increased 107.85% YTD. The short interest was N/A as of 10/14/2011.

9. NASDAQ OMX Group, Inc. (NASDAQ:NDAQ)

Sector

Financial Services

Industry

Financial Exchanges

Market Cap

$4,480M

Beta

1.05

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The company The NASDAQ OMX Group, Inc. provides trading, clearing, exchange technology, securities listing and public company services worldwide. NDAQ has a P/E of 11.11 & a net margin[TTM] of 13.58%. The stock has increased 6.62% YTD. The short interest was N/A as of 10/14/2011.

10. Rockwood Holdings Inc. (NYSE:ROC)

Sector

Basic Materials

Industry

Specialty Chemicals

Market Cap

$3,537M

Beta

3.02

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The company Rockwood Holdings, Inc. develops, manufactures, and markets specialty chemicals and materials for industrial and commercial applications primarily in Germany, the United States and Europe. ROC has a P/E of 11.05 & a net margin[TTM] of 12.54%. The stock has increased 17.56% YTD. The short interest was N/A as of 10/14/2011. We hope this list helps as investors do their own due diligence on low price-multiple stocks who have outperformed the market YTD. *Company profiles were sourced from Finviz.

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