These Single-Digit P/Es Are the Real Deal

I admit it: I often look at P/E ratios below six with a pre-determined level of skepticism. My rationale is that there's no viable reason a growing company should trade that cheaply, so clearly there must be something wrong that's keeping its value so constricted.

But that's not always the case. There are examples out there of companies that trade at single-digit P/E ratios that are indeed the real deal, i.e., they are great values that investors have largely ignored. Today, I'll share three with you that I feel hold promise beyond the low P/E ratio they're currently being assigned.

Source: Yahoo! Finance, TTM= trailing 12 months.

HollyFrontier
Nothing is finer than investing in a refiner when oil is heading north of $100 and refined product prices are soaring. That unusual combination plus some geographical advantages are creating the perfect storm of profits for refiner HollyFrontier.

In its recently concluded fiscal year, HollyFrontier reported $1 billion in full-year net income and a 95% increase in overall refinery gross margins. The company's results continue to benefit from the operational synergies of merging Holly and Frontier together last year and from the wide differentials associated with inland and coastal crude oil.

Although some investors might be displeased to be staring at a forward P/E of nine when its trailing-12-month P/E is just 5.5, I'd like to remind you that its fiscal 2012 EPS estimates have been on the rise. In addition, HollyFrontier pays out a quarterly dividend of $0.10 (equating to a 1.1% yield), currently has a $350 million share repurchase program in place, and has paid out $1.50 in special dividends since the merger.

Integrated Silicon Solution
You haven't heard much from me about my "10 Small Caps to Rule Them All" pick Integrated Silicon Solution in nearly a year, but it remains one of my favorite value-oriented small-cap plays in the technology space.

The company, which is a provider of specialized memory products, recently reported first-quarter results that signaled continuing strength in the DRAM market. Integrated Silicon's results included a record $44.3 million in DRAM revenue with automotive market revenue jumping by 44%. If there was one weakness, it was that its analog segment is suffering from China's transition from feature phones to smartphones. It will take Integrated a few quarters to fully make that transition, but keep in mind that this remains a smaller part of the company's overall revenue stream in the first place.

The key driver to Integrated Silicon's value is its cash-rich balance sheet. The company ended the quarter with $102.2 million in cash and no debt even after purchasing Si En Integration Holdings last year (for reference, its current market value is only $292 million). Its strong cash balance will allow it to weather economic hiccups well and position itself for more potentially accretive acquisitions.

Thompson Creek Metals
There's a reason this stock is a personal holding of mine and why I added to it earlier in the month; like the other two stocks here, it's the real deal.

Thompson Creek, known right now for its molybdenum production, piqued my interest when it acquired its Mount Milligan mine and the 2.1 billion pounds of copper and 6 million ounces of gold that come with it. After striking a deal with Royal Gold (Nasdaq: RGLD) to sell 40% of its yearly gold production to the company at a discounted rate, Thompson wound up with a payment of $270 million that will help facilitate the large capital expenditures going into the mine's production. The gold production alone is enough to cover the costs of the mine, which makes this a compellingly cheap long-term hold once copper production begins in late 2013.

Foolish roundup
Finding single-digit P/Es is a lot easier than you think, but finding companies that aren't flashes in the pan requires some digging. These three look poised for long-term success and truly appear to be exceptional values relative to their peers.

Do you have a single-digit P/E gem in your portfolio? Share it with your fellow Fools in the comments section below and consider adding these three to your free and personalized watchlist.

Just as I've attempted to here, our team of Rule Breakers is always looking for the next big thing before it happens. See which stock our analysts think could be the "Next Rule-Breaking Multibagger" for free!

• Add HollyFrontier to My Watchlist.
• Add Integrated Silicon Solution to My Watchlist.
• Add Thompson Creek Metals to My Watchlist.