23 ASX 200 stocks trade at single-digit PEs. But only 6 are projected to grow earnings

There is a pattern developing in our ongoing series looking at constituents of the ASX 200 which have trailing price-to-earnings (PE) ratios of under 10. While the ASX barely moved in the two months since the last update (+0.1%), four stocks have seen their respective PEs move into double digits. All of them for various reasons.

And if you thought purely investing in the index has been disappointing this year, the one-year share price performances of the stocks on this list may trump even that. Of the 23 names on the list, just three have recorded gains over the past 12 months.

Not that this has deterred the sell-side community from continuing to price in significant upside for some of these stocks heading into 2024 and beyond.

In this piece, we'll look at the current single-digit PE list and uncover some interesting insights about what's in it (and in some cases, what isn't in it).

Note: This list only covers the ASX 200. A complete list, including coverage of stocks outside the ASX 200, is available at this link.

ASX 200 stocks with single-digit PEs

'Consensus' is an aggregate of Refinitiv broker target prices. Data as at Monday, 27 November 2023.

Insight #1: Who's not on the list

Many of the names on this list have become familiar faces to readers of this series. Coal and energy stocks have had low PE ratios for some time, as have retailers Harvey Norman and JB Hi-Fi.

But regular readers of the list will also find four names that were on last month's list but are no longer on this list.

• A-REIT Centuria Capital (ASX: CNI) has been caught up in the general bounce we have seen in that sector of late. As yields have peaked and expectations grow that central banks have finished raising interest rates, REIT share prices have rebounded. The ASX A-REIT Index is up more than 10% in the past month alone.

• Fortescue Metals (ASX: FMG) has been caught up in the recent iron ore rally. Singapore-based iron ore futures contract prices rallied 20% in the last quarter alone. The share price is now up 12% over the last month and 30% over the past year as a result. Not bad for a company that has had 10 executives leave in less than three years.

• Elders (ASX: ELD) and Incitec Pivot (ASX: IPL) have both experienced short-term rallies on recent earnings and AGM updates. Elders reaffirmed its expectation for 5-10% earnings growth even in an El Nino environment. Meanwhile, Incitec Pivot claims it still has prospective interest from outside buyers for its fertiliser business. Profits for the year ending September 30th collapsed 57%, with its dividend slashed from 17 cents to just 5 cents.

Insight #2: It's going to be tough (if you believe the analysts)

As proof that it really is a difficult time to be a listed corporate right now, sell-side analysts believe 12 of the 23 names on this list will experience both an EPS and DPS decrease next year. In a market where investors are being more brutal and more selective about their stock selection, this could be bad news.

Insight #3: More earnings or more dividends (but not both)

The same EPS and DPS analyst forecasts also reveal that analysts are expecting earnings increases in some and dividend increases in others, but not both at the same time.

For instance, analyst expect earnings growth for companies like Spark New Zealand, National Storage REIT, and Qantas. But none of those companies are expected to increase their dividend on a year-on-year basis next year.

For Santos, Beach Energy, and GrainCorp, all three companies are forecast to raise their dividends in FY24. But all three companies are not expected to increase their earnings at the same time.

While these are just projections, they do provide interesting indicators nonetheless about the state of corporate Australia and which companies might increase payouts even in an earnings downgrade cycle.