The Stocks with the Lowest P/E Ratios You Can Invest in Today

It wasn’t long before David realized he had struck gold. Sitting in his home office, staring at a spreadsheet with numbers far below the market average, a smirk crossed his face. He had spent hours poring over data, combing through balance sheets, and now it seemed all the hard work had paid off. But here’s the thing—these stocks didn’t look like traditional “winners.” Low P/E ratios rarely do at first glance. If you’re new to the stock market, you might assume a low price-to-earnings ratio is a bad sign. After all, why else would a stock be priced so cheaply relative to its earnings? But that’s the catch—a low P/E ratio can actually mean value, untapped potential, or even a temporary market overreaction. And for David, that meant opportunity.

You see, the key to finding a great low P/E ratio stock is knowing what others don’t see yet. Maybe the market hasn’t recognized the company's future potential. Or perhaps there’s been a temporary setback, causing the price to plummet despite strong long-term fundamentals. By focusing on these overlooked stocks, David found opportunities that most investors would pass up without a second thought.

So why do investors like David look for low P/E stocks? It’s about the value—getting something for less than it’s worth. A P/E ratio, for those less familiar, compares a company's stock price to its earnings per share. It’s one of the most used metrics to value a company. The lower the number, the cheaper the stock is relative to its earnings.

What’s a “Good” P/E Ratio?

Before diving into specifics, let’s establish some baseline numbers. The market average P/E ratio tends to hover around 15 to 20. Anything below that, particularly below 10, raises eyebrows—but not always in a bad way. For instance, if a stock has a P/E ratio of 7, it’s priced at 7 times its earnings. Compare that to a stock with a P/E of 30, which means you’re paying 30 times its earnings. Which one seems like a better deal on paper?

But, as always in finance, the devil is in the details.

Context matters. A low P/E ratio in the energy sector might signal something different than a low P/E ratio in tech. For example, energy stocks have been historically undervalued, partly because of the cyclical nature of oil prices. Meanwhile, tech stocks often command higher P/E ratios because of growth potential. So when you find a low P/E stock in an industry known for high valuations, that’s when your eyes should light up.

Top Stocks with Low P/E Ratios Right Now

Here are a few companies with extraordinarily low P/E ratios today, and why they’re worth a closer look.

1. Ford Motor Company (F)
   P/E Ratio: 5.6
   Despite facing stiff competition in the electric vehicle market, Ford has managed to stay relevant. The company is investing heavily in electric vehicles and has a solid lineup coming in the next few years. However, investors seem hesitant to give Ford the same love they show to Tesla or Rivian. The result? Ford's stock has become incredibly cheap. With a P/E ratio under 6, this legacy automaker is a bet on the future of mobility.

2. Cigna (CI)
   P/E Ratio: 10.4
   Healthcare is often a recession-proof industry, yet Cigna's stock has lagged behind competitors. With rising healthcare costs, an aging population, and expanding insurance markets, Cigna is positioned for growth. The low P/E ratio reflects the market's hesitation, but it also presents an opportunity for investors who can see past short-term volatility.

3. Micron Technology (MU)
   P/E Ratio: 10.2
   The semiconductor industry is highly cyclical, and Micron has been riding the wave of high demand for memory chips. The company has faced some setbacks due to oversupply, but its long-term prospects remain strong. With increasing demand for data storage, AI, and 5G technologies, Micron’s low P/E ratio could be a reflection of temporary market conditions.

4. Citigroup (C)
   P/E Ratio: 6.7
   While many financial institutions have rebounded post-pandemic, Citigroup continues to lag. Its low P/E ratio could signal underlying concerns about its profitability compared to competitors like JPMorgan Chase or Bank of America. But Citigroup has been undergoing a transformation, focusing on core areas of growth while divesting non-core businesses. Investors with patience could find a bargain here.

What Drives Low P/E Ratios?

At this point, you might be wondering: Why are these stocks priced so cheaply? It’s crucial to understand that a low P/E ratio isn’t always a green flag. Sometimes it’s a red one. Here are the most common reasons a stock might have a low P/E ratio:

1. Temporary Market Overreaction
   Sometimes bad news leads to a stock sell-off, but the market might overreact. For example, if a company misses its quarterly earnings by a small margin, investors might panic and sell, driving the stock price down. This temporary dip in price could cause the P/E ratio to drop, making it a potential bargain.

2. Sector or Industry Trends
   Certain industries tend to have lower P/E ratios. For example, companies in sectors like energy, utilities, and finance often have lower P/E ratios due to lower growth expectations. In contrast, high-growth sectors like tech or biotechnology typically command higher P/E ratios. Understanding sector trends helps in identifying whether a low P/E ratio is a good deal or just reflective of the broader industry.

3. Underlying Problems
   It’s also possible that a stock has a low P/E ratio because of real, long-term problems. For instance, a company might be facing significant regulatory issues, declining sales, or bad management. In these cases, the low P/E ratio reflects the market's skepticism about the company's future.

Should You Always Buy Low P/E Ratio Stocks?

The short answer is no. A low P/E ratio is just one piece of the puzzle. Context is everything. Before jumping in, look at the company's earnings history, growth potential, competitive advantages, and industry trends. Sometimes a stock has a low P/E ratio for good reason, and you don't want to be the one holding it when it drops further.

The Risks of Chasing Low P/E Ratios

While David has had success investing in low P/E stocks, it’s not without its risks. For every Ford or Micron, there’s a stock with a low P/E ratio for a reason—poor management, outdated business models, or declining markets. Chasing low P/E ratios without a thorough understanding of a company's fundamentals can lead to poor investment decisions.

In Summary: Low P/E, High Potential

So what should you take away from all this? Low P/E ratio stocks offer potential, but only if you know what you’re doing. Don’t just look at the numbers—understand the story behind them. Is the company undervalued due to temporary setbacks, or is there a deeper problem? If you can spot the difference, you’re in a position to make some very profitable investments. And who knows? Maybe you'll end up smirking at your computer like David, realizing you’ve found a hidden gem before the rest of the market does.