We recently published a list of 11 Ridiculously Cheap Stocks to Invest in. In this article, we are going to take a look at where Diversified Energy Company PLC (NYSE:DEC) stands against other ridiculously cheap stocks to invest in.
Just as we hunt for bargains in the commodity market—comparing relative prices, identifying discounted products, and getting the product most valued for our money—investing in the financial market isn’t any different. In both investments, price matters.
In a world of overpriced stocks, spotting the hidden gem is what differentiates a smart investor from an impulsive investor. One who realizes that value isn’t just about what you buy rather it’s more about what you pay, is the one who is likely to identify an overlooked but full of value stock.
Let’s first understand what a cheap stock actually implies. There are two most common interpretations of such a stock. First, a stock may be regarded as a cheap stock if it has a low share price. Second, an undervalued stock is more commonly known as a cheap stock. Our analysis resonates with the second interpretation, that a cheap stock is a stock that is trading below its intrinsic value based on factors like earnings, revenue, or assets. Thus, in the market, investors say it’s “cheap” relative to its true potential, making it a compelling investment.
One such measure to spot a cheap stock is through the forward price-to-earnings ratio. This is a measure used by investors to actually see how much they are paying for each dollar of a company’s earnings. A low P/E can signal an undervalued stock when compared to its competitors, historical average, and broader market average.
A report by Hoover Capital Management (HCM) analyzes the historical performance of value versus growth stocks through the French High Minus Low (HML) factor. The results from 97 years of data, from July 1926 to December 2023, strongly support value investing. The cumulative return of value stocks surpassed growth stocks by an impressive 3,000%. In other words, value investing has delivered a 30 times higher return on growth than growth investing. It can be further reinforced through the research by Economist Victoria Galsband, according to which cheap stocks outperformed growth stocks from 1975 to 2010 in every single G7 country, including Canada, the U.S., Japan, and the leading European countries.
Another report that analyzed the impact of additions or removals of companies from the S&P index on their valuations indicated that, as removals are associated with the undervaluation of the stock and vice versa, many companies removed from the index outperformed the market. A study by Research Affiliates highlighted that stocks taken out of the S&P between 1990 and 2022 outperformed those that were added by more than 5% annually. This provides a compelling case for our view that undervalued stocks, translated to cheap stocks, have a greater probability of yielding higher returns.
Our Methodology
We have compiled a list of 11 ridiculously cheap stocks through the Finviz screener. In doing so, stocks have been selected that have a lower than 5 price-to-earnings (P/E) ratio. These stocks cover a range of industries, from consumer products to natural resources exploration. These companies are then listed according to their P/E ratios, from highest to lowest.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Diversified Energy Company PLC (DEC) the Ridiculously Cheap Stock to Invest in?
An aerial view of an oil rig in the mid-western United States, capturing the importance of the natural gas industry in the region.
Diversified Energy Company PLC (NYSE:DEC) is an energy company focusing on natural gas and liquids production, transport, and marketing. Through the company’s emphasis on well retirement, the strategy adopted revolves around acquiring existing, long-life assets and enhancing their environmental and operational performance before safely retiring them. With operations mainly in the U.S. Appalachian and Central regions, the company has a unique business model.
True to its name, Diversified Energy Company PLC (NYSE:DEC) is mastering the art of diversifying its risk through strategic acquisitions. The business model of the company is such that it emphasizes acquiring old wells with the goal of enhancing the recovery rate, controlling operating costs, and improving their residual life.
A testament to their diversifying approach is the latest Maverick Resources deal, whereby the revenue is anticipated to grow substantially, with $50 million expected in annual synergies. As natural gas prices have increased considerably since the deal was announced in December, some upside to the value gained in the transaction is much more likely.
The Summit acquisition is also among the core strengths of Diversified Energy Company PLC (NYSE:DEC) as it is forecasted to uplift the cash flows. While it may be small in size, the magnitude of margins is what keeps the investors interested, as it comes with no additional cost. Analysts expect it to increase “Coal Mine Methane” revenue and improve pricing, consequently leading Natgas to trade at a premium.
The management’s guidance for 2025 strengthens the bullish outlook for Diversified Energy Company PLC (NYSE:DEC). The company is projected to yield a free cash flow of $420 million, a rise of 200% in contrast to its standalone 2024 results. The company also has plans to expand its coal mine methane capture initiative, with a whopping 300% plus growth in free cash flow from this segment over the next 24 months. Thus, the company’s future looks quite promising, and we can consider now the right time to capitalize on this ridiculously cheap stock’s potential.
Overall, DEC ranks 10th on our list of ridiculously cheap stocks to invest in. While we acknowledge the potential of cheap stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than DEC but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
