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Are Telstra shares and these 2 ASX stocks too cheap to ignore?

Are the share prices of Telstra Corporation Ltd (ASX: TLS), Paragon Care Ltd (ASX: PGC) and Apiam Animal Health Ltd (ASX: AHX) too cheap to ignore?

One of the best ways to beat the market is to invest in shares when they’re trading cheaply.

The three ASX shares below are seemingly trading cheaply:

Apiam

Apiam is a rural veterinary business, it’s trading at 9x FY19’s estimated earnings with a grossed-up dividend yield of 4.6%.

Unlike its capital city focused veterinary peers, a large part of Apiam’s earnings are generated by serving the large livestock population in regional Australia. This could be an attractive source of organic growth if Australia’s livestock exports keeps growing.

Other growth strategies for Apiam include opening veterinary businesses in regional Petstock retail stores. It is also slowly acquiring regional standalone veterinary clinics.

Paragon

Paragon is a healthcare product distributor, it’s also trading at 9x FY19’s estimated earnings with a grossed-up dividend yield of 7.1%.

It sells a variety of products such as beds, surgery equipment and devices to clients, primarily hospitals and aged care facilities. With the ageing population there should be a supportive tailwind for revenue growth over the coming years.

Paragon’s purchasing platform allows clients to order their products, which should lead to growing efficiencies and profit margins over time if Paragon can take advantage of the systems that it is setting up.

Telstra

Telstra is Australia’s biggest telco, it’s trading at close to 14x FY19’s estimated earnings with a trailing grossed-up dividend yield of 10.8%. However, some bearish estimates have predicted a sizeable cut to the dividend, so its forward grossed-up yield may only be 8.4%.

The telco seems to be betting all future growth on the future of 5G. There is a danger that it gets sucked into another low-cost war with competitors over time once every telco can offer 5G services. I’m not sure that consumer budgets could actually afford a major increase in their monthly bills at the moment.

Foolish takeaway

All three shares have their positives and negatives. I can see decent organic growth potential for Paragon and Apiam, which would make their current valuations very cheap indeed.

However, Telstra doesn’t look like cheap to me – it could be a value trap if its earnings keep falling.

Motley Fool contributor Tristan Harrison owns shares of Apiam Animal Health Ltd and Paragon Care Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Paragon Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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