2 great fall stocks that are cheap now

The situation on the stock exchanges seems to be slowly stabilizing again. The DAX has hovered around the 14,000 point mark for a few weeks now and can not quite decide where to go (from 27 May 2022, relevant to all courses). This allows investors to fill up their own portfolio with cheap stocks.

One consequence of the price decline in recent months is that it is now possible to find cheap valuable shares without the great effort. Of course, in order to assess whether a business is really cheaply valued, one has to consider a wide range of factors. The value of a company depends on future profits. From my point of view, a good first indicator is the relationship between share price and earnings per share. share, the so-called price-earnings ratio (P / E).

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Falling stock prices with rising profits?

Here are two examples of German stocks that are now extremely cheap on this basis.

BASF

Let’s start with that BASF-Action (WKN: BASF11). The BASF share has been falling for several years. The previous peak was reached in 2017. Since then, the stock has lost almost half of its value. In recent years, price erosion has also been very easy to justify. Because BASF presented very disappointing figures at the time. Sales have stagnated and profits have fallen year after year. A rising stock price is obviously not to be expected.

Last year, however, there was a dramatic trend reversal. Suddenly, BASF pulled its highest sales out of the hat for more than ten years. At the same time, net income from continuing operations has also taken a big leap to the highest level in more than a decade. Earnings per share was EUR 6.00.

So the stock is currently extremely cheap. For despite the excellent figures, the BASF share has lost more than 12% in the last six months and now costs only 51 euros. So you only pay 8.5 times last year’s earnings for the stock!

If BASF were to keep its profits constant over the next few years and pay it off in full as dividends, it would have paid back its entire investment after just nine years. At the same time, you would still own the same stake in the company.

In fact, BASF does not pay out all of its profits, but at least a large portion. This year, the dividend was increased to EUR 3.40. So you can look forward to a great dividend of more than 6.6% on this stock!

bmw

The situation is very similar bmw-Del (WKN: 519000) fra. Also at BMW, the result has disappeared in recent years. And here, too, there was a strong turnaround last year. The net result has skyrocketed to an incredible 12.5 billion euros. That equates to a profit of 18.79 euros per preferred share!

In relation to this, the share is valued at 80 euros, which is really ridiculously cheap. Even in January, when the stock cost 100 EUR, it was still a coup in relation to P / E.

BMW can therefore also look forward to an extremely high yield. This year, € 5.80 was distributed to shareholders, resulting in a return of 7.25%. Based on past earnings, the stock is already extremely cheap. Before you put the stock in your portfolio, just think about how likely it is that the profits will continue to be so amazing for the next few years. For the development of the share price also depends on it.

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Dennis Zeipert owns none of the aforementioned shares. The Motley Fool recommends BMW.

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