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Are these 3 top stocks as cheap as chips?

The S&P/ASX 300 Index (Index: ^AXKO) (ASX: XKO) is currently trading on an FY 2015 price-to-earnings (PE) multiple of approximately 15.3 It’s a reasonably bullish multiple and is based on expectations for earnings growth of around 11% and 8% in FY 2014 and FY 2015 respectively.

Given the seemingly lacklustre state of the economy these forecast growth rates may turn out to be ambitious.

The following three large-cap stocks (according to research provided by Morningstar) are all trading on multiples below the index, however their respective pricing must be considered in the context of their forecast growth rates too.

Lend Lease Group (ASX: LLC) is forecast to earn 106.1 cents per share (cps) in FY 2015, placing the stock on a forecast PE of 12.5. Despite an expected dip in earnings in the last year, this year is tipped to be a strong year – the stock could be trading at an excessive discount to the market.

Orica Ltd (ASX: ORI) is forecast to earn 172.7 cps in FY 2015 which suggests the market believes the company will manage to withstand the resource slowdown better than most companies exposed to the sector. Based on a current share price of $20.46 this implies a forward PE of 11.8 – given the low earnings growth and continued uncertainty surrounding the mining sector this discount could well be justified.

Caltex Australia Limited (ASX: CTX) is currently in the process of closing down certain refineries which will lead to a significant change in its business model. Consensus forecasts have the company earning 156.7 cps in FY 2015, which would represent an increase of over 50% from FY 2013. Based on this forecast the stock is trading on what looks to be an appealing multiple of 14.2.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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