Whether or not the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is expensive or not is a matter of fierce debate for many investors. Compared to the US markets I would say it is actually reasonably cheap, making it a great time to invest.
But for those that are concerned that it is getting a touch expensive I have picked out three shares which I believe are looking cheap now. They are as follows:
Australian Pharmaceutical Industries Ltd (ASX: API)
Australian Pharmaceutical Industries is the the owner and operator of the popular Priceline, Soul Pattinson, and Pharmacist Advice brands, as well as being a distributor to pharmacies across the country. In its half year results the company delivered underlying net profit after tax growth of 18.1% to $25.3 million. This was driven by a strong performance from its Priceline brand, as well as a reduction in operating costs as a percentage of sales.
Management plans to add to its 425 stores by opening a further 20 stores this year. Due to the market being largely fragmented, I see this level of growth as sustainable for a number of years to come. I believe this should go some way to helping the company continue its strong performance which has seen it grow earnings by an average of 11% per annum for the last five years. According to CommSec its shares are changing hands at 17x estimated full year earnings, making it a cheaper alternative to its rival Sigma Pharmaceutical Limited (ASX: SIP).
Bendigo and Adelaide Bank Ltd (ASX: BEN)
The regional bank is the cheapest of all Australian banks based on book value. At present Bendigo and Adelaide Bank shares are priced at a lowly 0.9x book value or 1.3x tangible book value, which in my opinion makes it one of the best options available to investors looking for exposure to the banking sector.
As well as being relatively cheap, the shares are expected to provide a market-beating dividend next year. According to CommSec, analysts have forecast it to pay a fully franked 6.8% dividend next year based on the current share price.
Orora Ltd (ASX: ORA)
Orora has been one of the best-performing shares on the S&P/ASX 200 since the packaging company demerged from Amcor Limited (ASX: AMC) in 2013, rewarding its shareholders with a huge 135% share price gain. Despite these strong gains I still feel the shares are great value now at just at 1x sales, compared to Amcor's 1.5x sales.
The company posted a 14% increase in sales and a 27% increase in net profit after tax in its half year results. Given it has around 44% of its sales deriving from North America, a weakening Australian dollar could prove to be a boost to its top-line growth that helps sustain this strong performance for a while yet.
