Cheap stocks are great, but sometimes you get what you pay for. What's the use of a bargain-basement P/E ratio if the company can't grow? I have a long investment horizon and a high tolerance for risk, so I'm more interested in promising growth stocks than stodgy dividend machines.

To find stocks that satisfy my need for speed while also going on sale at a great price, I like to look at the PEG ratio. It's such a Foolishly useful metric that we've been known to call it the Fool Ratio. Divide the trailing P/E ratio of a stock by the estimated five-year earnings growth, and you have a neat little package representing the growth-adjusted value of the company. A fairly valued stock should land near the 1.0 mark. Higher numbers might indicate an overvalued security. A strong business with a low PEG ratio rocks!

Southern Copper (NYSE: SCCO) is sporting a way-low PEG ratio of 0.5 today. The bottom line is expected to grow by about 28% a year over the next five years, and the stock is trading at a relatively low 17.5 times trailing earnings.

Here's how Southern Copper stacks up against some of its closest competitors in the copper-mining market:


Trailing P/E Ratio

5-Year Earnings CAGR Forecast

PEG Ratio

Southern Copper




Taseko Mines (AMEX: TGB)




Freeport-McMoRan Copper & Gold (NYSE: FCX)




Source: Yahoo! Finance. * No 5-year forecast available -- using 15% as it is the growth rate of the past 5 years. Feel free to substitute with your own forecast.

I'm no gold bug or basic materials expert, but I do love stock screens. Every time I'm out looking for companies with exceptional returns on equity, I run into Southern Copper. Combine that sign of solid management of company resources with industry-leading profit margins, and you get a potential buy-and-hold-forever stock. And when you get that at a PEG ratio of 0.5 along with a 5% dividend yield, you pretty much need to take a second look.

What to do next
As with all simple tools, the PEG ratio isn't a silver bullet to solve your portfolio's every quandary. It is, however, a great starting point for further research -- fellow Fool Joey Khattab has shown low-PEG stocks beating the market in a 1,000-ticker sample. With a very low PEG ratio backed up by a strong business, I'd say that you should get to know Southern Copper a little better. This stock rocks!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.