Cheap ASX stocks with P/Es less than 10: Which will grow earnings in FY24?

The low price-to-earnings scan locates ASX 300 stocks with P/Es of less than 10 and identifies those that can grow earnings in FY24.

There are currently 31 ASX 300 stocks with trailing P/Es of less than 10.

• The most common sectors are Materials (11), Energy (7) and Financials (4)

• The average 1-year performance is -19.8%

• The median 1-year performance is -21.2%

• The average consensus price target is 21.7% above current levels

The Cheapest ASX Stocks

The below data is sorted from lowest to highest P/E.

Target price' is an aggregate of Refinitiv broker target prices. Data as at Tuesday, 23 January 2024.

The Biggest Upside

APM Human Services is a global health and workplace services provider with operations across Australia, Europe, North America and Asia. It's a stock that's loved by brokers but is down 40% in the past month and down 71% in the past year.

APM provided a first-half FY24 last week which flagged a number of headwinds:

• Sustained and historic low levels of unemployment is leading to reduced client flows into employment services programs

• This leads to lower volumes of placements, especially in Australia and the UK

• Recruitment market for allied health professionals remains tight

• Higher interest rate costs and taxes

The company expects to deliver $1.14 billion in revenue in the first half of FY24, up 33.5% year-on-year as well as $148 million in EBITDA, down 11% compared to last year.

"In our view, whilst APM is a high quality and best in breed operator, the ongoing challenging operation environment, worsening revenue quality and implied operating deleverage create material headwinds," UBS analysts said in a note last week.

Like most brokers, UBS acknowledged the short-to-medium headwinds and downgraded the stock to NEUTRAL (from Buy) and cut its target price to $1.27 (from $3.00). This still reflects upside of 73.9% compared to current levels.

Earnings Growth

Trailing P/Es for many bargain-priced stocks are likely to rise as earnings fall in the upcoming reporting season. For example, Pilbara Minerals reported a 65% drop in first-half FY24 revenue on Wednesday. What will happen to the P/E ratio when its earnings have more than halved?

Fortunately, there are 10 companies from the above list that are forecast to grow earnings in FY24.

• Karoon Energy

• National Storage REIT

• Qantas

• Resolute Mining

• Seven West Media

• Spark New Zealand

• SSR Mining

• Stanmore Resources

• West African Resources

But each company comes with its own baggage (Qantas and its pun included). A few that come to mind include: Karoon Energy recently downgraded its production guidance due to mechanical issues at its SPS88 well. Resolute Mining and West African Resources are Africa-based gold miners that tend to trade at a substantial discount to peers.