Investors have been skeptical about the condition of the market for some time now. The year began on a rocky note with a slump in the commodities market and a strengthening greenback. But an improving demand/supply scenario due to a host of reasons lifted oil prices. This started to have a positive effect on the markets at large.

Now the stock market is most likely to see growth in the coming months on the back of increasing economic stability. So far this year, the Dow Jones Industrial Average (DJI) and the Standard & Poor’s 500 (S&P 500) have improved by 2.2% and 1.9%, respectively.

So, we believe it is a good time for investors to take positions in the right stocks before a possible rate hike by the Fed (expected in the upcoming months) and the presidential elections scheduled this year. The latest polls out of the U.K. also reveal waning sentiment for a Brexit ahead of Thursday’s referendum. This should also have a positive effect on the markets. Investors should start digging into fundamentally strong stocks with a favorable price/earnings (P/E) ratio, which will provide them with profitable returns over the long term.

How Does P/E Ratio Help?

The P/E ratio is a tool very commonly used for stock selection. It shows the amount an investor is willing to pay in the company to get one dollar of its earnings. The P/E ratio provides an inkling as to whether a stock has adequate growth potential.

Normally, stocks with a high P/E imply that higher earnings growth is expected in the future in contrast to stocks with a lower P/E. Investors may be willing to pay a premium for those “future” earnings before they become a reality. As a result, they are mostly known as “risky” investments.

In contrast, a low P/E shows that either a stock is currently undervalued or that it is performing better than its past trends. Stocks with a low P/E ratio can be considered good buys if they have a solid growth potential that the market is still unaware of.

Why to Invest in Growth Stocks?

Growth stocks are those stocks that are deemed to have the potential to outperform the markets largely over time owing to their future potential. These companies’ top and bottom line growth will directly lead to an increase in the stock price. Profits of these companies are generally realized through capital gains and not dividends, as almost all growth companies reinvest their earnings and do not pay dividends.

How to Pick the Right Stocks?

Choosing the right stocks that are expected to stand out in the long run is not an easy task.

Our Growth Style Score highlights all the vital metrics of the company’s financials to obtain a true picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2 offer the best investment opportunities.

We have picked five stocks that have a P/E ratio of less than 12, boast a favorable Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and carry a Growth Style Score of ‘A’ or ‘B’.

Dean Foods Company

Based in Dallas, TX, Dean Foods is a leading processor and distributor of milk and other dairy products in the U.S. as well as a leading manufacturer of various specialty food products. The company enjoys a leading position in the food and beverage industry owing to its strong portfolio of brands, which provide a competitive advantage.

Dean Foods sports a Zacks Rank #1 and a Growth Style Score of ‘A’. The company has a P/E ratio of 11.47.

Omega Protein Corporation

Headquartered in Houston, Omega Protein Corporation is one of the nation's leading producers of edible fish oil, which is high in nutritionally desirable Omega-3 fatty acids and is used in a variety of food products.

This Zacks Rank #1 stock currently has a Growth Style Score of ‘B’. The company’s P/E ratio is 11.47.

BG Staffing, Inc. (BGSF Quick QuoteBGSF - Free Report)

BG Staffing provides staffing services to a variety of industries through its various divisions. Headquartered in Plano, TX, BG Staffing is primarily a temporary staffing platform that has integrated several regional and national brands.

Sporting a Zacks Rank #1, BG Staffing currently has a Growth Style Score of ‘A’. The company has a P/E ratio of 9.47.

Newtek Business Services Corp. (NEWT Quick QuoteNEWT - Free Report)

Newtek Capital was formed by combining the businesses previously owned by BJB Holdings, Inc. and REXX Environmental Corporation and is operating as a holding company for a network of partner companies in a collaborative and coordinated effort to develop successful businesses in a number of existing as well as emerging, technological business lines.

Newtek Capital carries a Zacks Rank #2 and currently has a Growth Style Score of ‘B’. The company’s P/E ratio is 7.11.

Korea Electric Power Corp. (KEP Quick QuoteKEP - Free Report)

Korea Electric Power is an integrated electric utility engaged in the generation, transmission, and distribution of electricity and development of electric power resources in South Korea.  The company was incorporated on Jan 1, 1982. As of Dec 31, 2015, Korea Electric Power had a total generating capacity of 97,649 megawatts (MW) from coal, gas, oil, nuclear, hydro and alternate energy-based generation units.

This Zacks Rank #2 stock currently has a Growth Style Score of ‘B’. The company’s P/E ratio is 5.25.

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