5 Undervalued Materials Stocks

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 |  Includes: ANRZQ, CLF, KRO, MT, TCPTF
by: Stookle

Price to earnings ratio is the most commonly used investment metric. The assessment of relative changes in PE ratio over the course of time highlights the low and high multiples investors are willing to pay for the current and future earnings of a company. Most investors would like to compare the current PE of the company with its historical averages. Comparing a company's current P/E ratio with benchmarks such as its historical P/E average can help a value investor determine if the stock is cheap, fully valued or overpriced. We identified the top 5 Materials stocks trading below or near the average of its yearly low P/E for the last 5 years. These securities are pretty undervalued compared to others in the sector.

Thompson Creek Metals (TC): Thompson Creek Metals Company Inc. and its subsidiaries engage in mining, milling, processing and marketing molybdenum products in the United States and Canada. TC is trading with a return on invested capital of 9.28%. The company has an average yearly minimum forward earnings multiples of 6.81 and a mean yearly average forward earnings multiples of 9.04 over the last 5 years. With these multiples the company would be valued at $8.03 and $10.66 based on its historical minimal and average FPE estimates. TC has a sum of growth and yield to PE (GY2PE, stocks with GY2PE more than 2 were considered as value stocks) of 4.92. Thompson Creek is trading below its book value of $10.12. TC is currently trading at $7.74 below its 5 year minimum FPE multiples.TC is up $0.88 or 11.21% this year.

Alpha Natural Resources (ANR): Alpha Natural Resources, Inc. and its subsidiaries engage in the production, processing, and sale of coal in the United States. The company offers metallurgical coal for use in the steel-making process; and thermal coal to electric utilities and manufacturing industries. ANR is trading with a ROIC of 2.81%. ANR has an average yearly minimum forward earnings multiples of 23.42 and a mean yearly average forward earnings multiples of 50.30 over the last 5 years. With these multiples the company would be valued at $82.32 and $176.80 based on its historical minimal and average FPE estimates. ANR has a GY2PE of 3.42. Alpha Natural has a book value of $36.77. ANR is currently trading at $22.55 below its book, raising $2.12 or 10.38% this year.

ArcelorMittal (NYSE:MT): ArcelorMittal operates as an integrated steel and mining company. The company serves global carbon steel markets, including automotive, construction, household appliances and packaging. ArcelorMittal offers commodity steel, long, flat, carbon steel and alloy products. The company is trading with a ROIC of 3.35%. MT has an average yearly minimum forward earnings multiples of 9.94 and a mean yearly average forward earnings multiples of 16.49 over the last 5 years. With these multiples the company would be valued at $27.42 and $45.50 based on its historical minimal and average FPE estimates. MT has a GY2PE of 2.81. The company has a book value of $38.47, yielding 3.92%. MT is currently trading below its book and 5 year minimum FPE at $19.83, raising $1.64 or 9.02% YTD.

Kronos Worldwide (NYSE:KRO): Kronos Worldwide, Inc. is a producer and marketer of titanium dioxide pigments (TiO2). The titanium dioxide pigments are used to impart whiteness, brightness, opacity, and durability for products, such as coatings, plastics, and papers, as well as various specialty products, such as inks, food and cosmetics. KRO is trading with a ROIC of 11.73%. The company has an average yearly minimum forward earnings multiples of 4.98 and a mean yearly average forward earnings multiples of 9.88 over the last 5 years. With these multiples the company would be valued at $16.55 and $32.85 based on its historical minimal and average FPE estimates. The company has a GY2PE of 2.54. The company has a book value of $7.67, yielding 2.53%. KRO is currently trading at $22.16, raising $4.12 or 22.84% this year.

Cliffs Natural Resources (NYSE:CLF): Cliffs Natural Resources Inc. is an international mining and natural resources company. Cliffs produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. CLF is trading with an ROIC of 24.75%. The company has an average yearly minimum forward earnings multiples of 5.39 and a mean yearly average forward earnings multiples of 17.10 over the last 5 years. With these multiples the company would be valued at $63.97 and $203.02 based on its historical minimal and average FPE estimates. CLF has a GY2PE of 2.66. The stock has a book value of $40.02, yielding 1.22%. CLF is currently trading at $68.82, raising $9.04 or 14.5% YTD.

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