Insider Monkey
18 High Growth Low PE Stocks
Fahad Saleem
9 min read

In This Article:

In this article, we will take a detailed look at the 18 High Growth Low PE Stocks. For a quick overview of such stocks, read our article 5 High Growth Low PE Stocks.

When value stocks came back with a vengeance in 2022, value investors cheered what they thought was the beginning of a long bull run of value stocks. But thanks to the AI boom, growth stocks rebounded in 2023. In a ten-year period ending 2021, the Russell Growth 1000 Index doubled the performance of the Russell 1000 Value Index. The so-called 'value investing' strategy has taken a hit amid an unending growth of technology stocks. But over the years the traditional boundaries between value and growth investing have faded. In fact, successful investors like Warren Buffett have long been saying that differentiating between value and growth does not make sense as they see growth a part of the broader value investing philosophy. Warren Buffett once said:

"There is no such thing as growth stocks or value stocks as Wall Street generally portrays them, as contrasting asset classes. Growth is part of the value equation.”

There was a time Buffett stayed away from tech stocks like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA) saying he did not understand business models of these companies. But today he has huge stakes in some of the top tech companies in the US.

Relying totally on PE ratios without paying attention to fundamentals and growth of companies is also not useful. For example, Oakmark in its September 2023 report on Value Vs Growth said the following which shows the importance of paying attention to both value multiples and growth metrics before making investment decisions:

"When we compare the 50 lowest ranked companies by P/E ratio on the S&P 500 today to the ones that made that list in previous periods, we don’t observe any decline in business quality. Therefore, considering both the relatively high price of the higher P/E companies and the solid business quality of the lower P/E companies—we believe that low P/E stocks today present a better hunting ground than they normally do. Last year we bought depressed stocks of high- growth businesses, such as Uber, at a double-digit free cash flow yield; Workday at a low price relative to sales; and Adobe at only a slightly higher than average P/E ratio. This year, after strong outperformance, we sold them and bought much lower P/E stocks. Here’s a fun way to think of it: In 2022, we bought a share of Adobe for about three shares of CVS Health. (CVS was just under $100 and Adobe under $300). This year we sold Adobe to buy more than six shares of CVS. (Adobe increased to well over $400 and CVS fell to $70.) We thought Adobe was cheap when we bought it, despite it being a high-growth business, and that CVS was fully priced when we sold it, despite it having a below-average P/E ratio."

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