Everybody loves a bargain. Indeed, whether it's shares, electrical items, holidays, or anything else, we all love to buy something for less than we think it's worth.
So with the ASX having delivered a flat performance during 2014, there are many more companies trading at prices that may not fully reflect their future potential.
With that in mind, here are three stocks that appear to trade at a discount to their intrinsic value and, therefore, could be worth buying right now.
Rio Tinto Limited
With a P/E ratio of just 9.9, shares in Rio Tinto Limited (ASX: RIO) trade well below the wider market's current rating of 15.1. Of course, that's not without good reason, since the falling price of iron ore has hurt Rio Tinto's bottom line and left many investors questioning the company's near-term future.
Furthermore, with the supply of iron ore being relatively strong and demand from countries such as China being relatively weak, the short to medium-term outlook for iron ore miners such as Rio Tinto remains rather uncertain.
However, with Rio Tinto believed to have the lowest cost curve in the industry, it could prove to be a major winner in the long run. That's because it could increase its market share while demand is weak, with a view to benefitting from potentially higher prices in future years.
Certainly, the company is doing all the right things in terms of reducing costs, making efficiencies and mothballing uneconomic projects. And, with a very low rating, now could be a great time to buy and hold Rio Tinto for the long run.
Telstra Corporation
While Telstra Corporation Ltd (ASX: TLS) has a much higher P/E ratio than Rio Tinto, with it being 15.7 versus 9.9 for the iron ore miner, it still seems to offer good value. That's because Telstra has considerable long term potential, with there being opportunities for growth both inside Australia, and also in Asia.
For example, Telstra remains a dominant player in the Aussie mobile market and, with the company having the potential to become an NBN wholesale service provider, it could deliver surprisingly strong growth numbers moving forward. In addition, Telstra is also pivoting towards Asia, with the company having a $5 billion war chest through which to stimulate its top and bottom lines in a region that could provide it with much stronger growth over the medium to long term.
Furthermore, with a fully franked yield of 5.2%, Telstra should appeal to income-seeking investors, and appears to offer upbeat growth prospects that could justify a higher share price in 2015 and beyond.
AMP Limited
With its P/E ratio also being relatively high at 16.8, AMP Limited (ASX: AMP) is hardly cheap at the moment. After all, the ASX has a lower P/E ratio of 15.1, although AMP's rating is lower than that of the general insurance sector, which has a P/E ratio of 17.1.
Nevertheless, AMP seems to be good value at the moment simply due to the excellent growth prospects that are on offer. Indeed, over the next two financial years it is forecast to increase its bottom line at an annualised rate of around 32%, which means that its PEG ratio is a mere 0.53.
Interestingly, AMP is going through a transitional period at the moment, with it integrating a number of assets (such as its financial planning arm) into the business. As a result, such strong growth numbers are extremely impressive and, once the efficiency and reorganisational changes are made, the company's bottom line could continue to increase at a brisk pace, thereby helping it to deliver excellent share price performance over the medium term.
