3 Top Value Stocks on the TSX Index

This trio of stocks, including Molson Coors (TSX:TPX.B)(NYSE:TAP), might be too cheap to pass up.

| More on:

Hello again, Fools. I’m back to highlight three attractive stocks with low P/E ratios. As a quick reminder, I do this for conservative investors because low P/E stocks: generally provide a wider margin of safety than high P/E stocks; tend to come from steady sectors; and outperform the market over the long haul.

It’s not a perfect metric by any means. But the P/E ratio remains one of the most important tools investors have to measure value.

So, without further ado, let’s get to our list.

Have a cold one

Leading things off is Molson Coors Canada (TSX:TPX.B)(NYSE:TAP), which currently has a trailing 12-month (TTM) P/E of 8.9. Shares of the beverage giant are down 17% over the past six months versus a loss of 1.8% for the S&P/TSX Capped Consumer Discretionary Index.

While 2018 hasn’t been the best year for Molson, the company is heading into 2019 with some momentum. In Q3, net income increased 17.9% as net sales improved 1.8% to $2.9 billion. Operating cash flow clocked in at $1.8 billion, an improvement of $646 million from the prior year.

Looking ahead, management increased its cost-savings guidance for the rest of the year, and reaffirmed the dividend outlook.

When you add a decent yield of 2.4% to Molson’s low P/E, the stock looks mighty attractive.

Powerful pick

Next up, we have Power Financial (TSX:PWF), whose shares sport a TTM P/E of 9.9. The financial holding company is down 22% over the past year, while the S&P/TSX Capped Financial Index is off 8% during the same time frame.

The stock’s weak performance in 2018 presents an attractive opportunity for long-term income-oriented investors. Over the past 30 years, Power’s dividend has grown at a compounded rate of 11% per year. Moreover, shareholders have achieved a compounded return of about 13.5% over the same period.

Currently, the stock boasts a particularly juicy yield of 6.1%. Combine that with a low P/E, as well as a comforting beta of 0.7 (30% less volatility than the overall market), and Power’s long-term risk/reward tradeoff looks attractive.

Grocery gang

Rounding out our list of value plays is Metro (TSX:MRU), which currently has a TTM P/E of 6.2. Over the past year, shares of the grocery store operator are up 13%, while the S&P/TSX Capped Consumer Staples Index is flat during the same time frame.

Metro continues to fire on all cylinders. In its most recent quarter, adjusted earnings came in at $161 million (up from $131 million in the prior year) as sales increased 16% to $3.74 billion. More importantly, same-store sales — a key metric in the retail — grew 2.1%.

Metro’s dividend has grown by more than 100% over the past five years, and by more than 300% over the past ten.

When you couple Metro’s near-term operating momentum with management’s long track record of shareholder friendliness, the stock might be too good to pass up.

The bottom line

There you have it, Fools: three tempting low P/E stocks worth checking out.

As always, don’t view them as formal recommendations. They’re simply ideas for further research. Low P/E stocks can very often be value traps, so plenty of due diligence is still needed.

Fool on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Molson Coors Brewing.

More on Dividend Stocks