By Jeff Reeves @ MarketWatch

Opinion: 5 cheap stocks that aren’t value investing traps

Published: Apr 17, 2015 6:01 a.m. ET

While sentiment matters and headlines can change, there are few substitutes for good analysis that compares investment options objectively based on numbers and not narrative.

Lately, I’ve been looking for stocks that offer good value in a market that appears increasingly stretched. And I’ve found five stocks that look cheap — but unlike some of the dogs that have crashed thanks to failure, these picks are decidedly not value traps and have a lot to offer.

Each of these stocks trades at a lower earnings multiple than the market at large — which would be a forward P/E of 17.5 for the S&P 500 SPX, -1.24%  and 19.2 for the Nasdaq COMP, -1.84% These stocks also can be had at an attractive price/sales ratio, at least compared with the 1.8 reading for the S&P.

On top of that, I looked for stability in the form of plenty of cash on the books and a sustainable dividend as a hedge when the market is rocky. The result is a list of five surprising value stocks that look like bargains. Here they are, with the numbers to show my work:

1. Valero Energy

·       Market Cap: $29.6 billion

·       Cash and Investments: $3.7 billion million or, or 13% of market value

·       Price/sales: 0.42 based on a projected $71.2 billion in FY2015 sales

·       P/E ratio: 8.7 based on projected EPS of $6.60 in FY2015

·       Dividend Yield: 2.8%

It seems crazy to chase an energy stock in this environment. But while Valero Energy Corporation VLO, -2.56%   has underperformed in the last year or so, the stock has really been in a groove since its January lows, gaining close to 30% in just three months.

That’s because, in the words of Ben Levisohn at Barron’s, Valero “knows how to take lemons and make lemonade” and posted robust fourth-quarter earnings on strong product margins. Given this recent earnings success and extremely attractive valuation metrics, Valero could be worth a look before its first-quarter numbers hit at the end of the month.

2. Lexmark International Inc.

·       Market Cap: $2.7 billion

·       Cash and Investments: $934 million or, or 35% of market value

·       Price/sales: 0.75 based on a projected $3.6 billion in FY2015 sales

·       P/E ratio: 12.1 based on projected EPS of $3.61 in FY2015

·       Dividend Yield: 3.3%

Lexmark International Inc. LXK, -1.38%   is hardly a sexy name, and is most recognizable to investors from its laser printers. Admittedly, Lexmark stock has seen stagnant revenue in recent years, but profits are quite strong and the company is sitting on a nice pile of cash, with good operating cash flow.

You may be surprised to see that the stock is actually up almost 6% this year, and is up 90% since January 2013 vs. just 50% or so for the S&P 500 in the same period. Take this recent strength with a 3.3% dividend and you’ve got reasons to look at Lexmark. That dividend of 36 cents per share quarterly is sustainable at less than 40% of this year’s projected earnings, and should provide stability no matter what happens in 2015.

3. Cooper Tire & Rubber Co.

·       Market Cap: $2.4 billion

·       Cash and Investments: $552 million or, or 23% of market value

·       Price/sales: 0.79 based on a projected $3.1 billion in FY2015 sales

·       P/E ratio: 13.7 based on projected EPS of $3.06 in FY2015

·       Dividend Yield: 0.1%

You’re not going to get much income from Cooper Tire & Rubber Co. CTB, -1.98%   since the stock pays only a nominal dividend of 10.5 cents quarterly.  However, the company’s stock is attractive on a number of other valuation metrics and has a solid balance sheet. And the fact that vehicle sales are expected to be quite strong in 2015, hitting 17 million and marking the highest level since 2005 according to some estimates, bodes well for Cooper.

You can’t argue with the tape — Cooper stock is up 21% year-to-date in 2015 against a flat market, and the charts continue to look bullish as Cooper approaches its May earnings report.

4. R.R. Donnelley & Sons  

·       Market Cap: $4.0 billion

·       Cash and Investments: $528 million or, or 13% of market value

·       Price/sales: 0.34 based on a projected $11.8 billion in FY2015 sales

·       P/E ratio: 12.8 based on projected EPS of $1.57 in FY2015

·       Dividend Yield: 5.2%

R.R. Donnelley & Sons RRD, -2.72%   is a communications and public relations firm that has been charging higher in the last few years. Since January 2013, shares are up 126% vs. 50% or so for the S&P 500, and shares have tacked on 20% year-to-date.

Still, the valuation metrics are great despite this run, with low multiples on both sales and earnings. Furthermore, the juicy 26-cent dividend each quarter adds up to a hefty 5.2% yield. Though the payout is a majority of total earnings — at a 66% payout ratio — the company can comfortably sustain that dividend, especially considering it has more than $500 million on hand in cash and investments.

5. Emcor Group

·       Market Cap: $3.0 billion

·       Cash and Investments: $432 million or, or 14% of market value

·       Price/sales: 0.45 based on a projected $6.6 billion in FY2015 sales

·       P/E ratio: 16.8 based on projected EPS of $2.81 in FY2015

·       Dividend Yield: 0.7%

Electrical and mechanical construction company Emcor Group EME, -3.69%   is focused on nuts-and-bolts building and industrial services. But given the continued improvement in the U.S. economy, Emcor has been doing quite well lately with shares up 6% so far this year, outperforming the S&P 500 three-fold even after a mild earnings miss in its fourth-quarter report.

Emcor reports earnings next at the end of April. Though revenue has been relatively flat lately, the company has seen earnings growth in four of the last five quarters on a year-over-year basis. If Emcor can prove the miss in January was an outlier, it should power higher — and given the stock’s uptrend recently, Wall Street seems to think that’s a highly likely scenario.