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This week, we screened for companies with low price to earnings ratios (P/E). At Value Line, P/E is calculated by dividing a stock’s recent price by the total of the last six months of earnings and the next six months of estimated earnings. The resulting figure shows the multiple that investors are currently willing to pay for one dollar of earnings. Companies trading at low P/E multiples are relatively “cheap”, but there is often a reason for a low P/E, such as weak earnings or a depressed stock price. Consequently, P/E should be just one valuation metric that investors use to evaluate stocks. Below we have highlighted five companies with low P/E ratios. We limited the list to Large-cap companies (market capitalizations over $5 billion) with stock prices over $5.00.

Humana Inc. (HUM) is one of the nation's largest publicly traded health and supplemental benefits companies. At the end of 2008, it had approximately 11.6 million medical members. Humana is a full-service benefits solutions company, offering a wide array of health and supplemental benefit plans for employer groups, government programs, and individuals. In 2008, 72% of premiums and administrative services fees were derived from contracts with the Federal government.

Noble Corp. (NE) was formerly known as Noble Drilling, and provides offshore contract drilling and engineering, production management, and procurement services to the oil and gas industry. Its fleet consists of 63 mobile offshore drilling units located worldwide (43 jackups, 13 semisubmersibles, 3 submersibles, and 4 drillships). Over 80% of these vessels are deployed in the international markets, including the Middle East, Mexico, the North Sea, Brazil, West Africa, and India.

ACE Limited (ACE) provides insurance and reinsurance for a diverse group of international clients in about 140 countries. The company’s net premiums in 2008 were derived from North America (43%), Overseas General (40%), Global Reinsurance (8%), and Life Insurance and Reinsurance (9%).

DISH Network Corporation (DISH) was founded January 1, 2008 when its predecessor company, EchoStar Communications Corp. separated into two different companies. It provides direct broadcast satellite television service in the U.S. to almost 14 million customers. The company provides access to about 500 video and audio channels, as well as digital video recorders and interactive TV applications. DISH also offers Latino and International programming, as well as high-speed internet service.

Lilly (Eli) and Co. (LLY) develops, manufactures, and markets pharmaceuticals and animal health products. The company markets its products in about 135 countries. Brand names include Cymbalta, Prozac (antidepressant); Axid (anti-ulcer); Kefzol, Ceclor, Lorabid (antibiotics); Zyprexa (schizophrenia); Humatrope (growth hormone); Humulin (insulin); Reopro (angioplasty); and Evista (osteoporosis).

The table below lists the top 15 stocks (including the five we highlighted) that our screen produced, ranked by P/E ratio. All data as of 8/13/09.

 

Company

Ticker

Stock Price

Market Cap $ (Mil)

Current PE Ratio

Humana Inc.

HUM 

$34.91

5,921.4

5.7

Noble Corp.

NE 

$35.26

9,211.7

5.8

ACE Limited

ACE 

$50.06

16,814.7

6.5

ENSCO Int'l

ESV 

$38.70

5,510.9

7.0

Transocean Ltd.

RIG 

$77.49

24,870.7

7.2

CIGNA Corp.

CI 

$29.05

7,925.7

7.5

Dish Network 'A'

DISH 

$17.99

8,016.4

7.5

Lilly (Eli)

LLY 

$32.87

37,768.3

7.6

Allstate Corp.

ALL 

$28.93

15,506.5

7.8

Aetna Inc.

AET 

$28.14

12,575.8

8.0

Lincoln Nat'l Corp.

LNC 

$24.14

6,181.0

8.1

Forest Labs.

FRX 

$27.78

8,378.9

8.4

Everest Re Group Ltd.

RE 

$84.29

5,187.4

8.4

El Paso Corp.

EP 

$9.97

6,965.6

8.7

CNA Fin'l

CNA 

$22.18

5,967.0

8.7