One of the hallmarks of improved investor sentiment is when folks are willing to pay ever greater premiums for equities in expectation of future profit growth. And since the market started rallying from its early March lows, it's clear that sentiment seems to be improving -- at least in certain corners of the market.

The forward price/earnings multiple, which divides a company's share price by analysts' average estimate for future earnings per share, for the S&P 500, for example, has risen to 16 from 13 in March, according to The Wall Street Journal Market Data Group.

Such growth is a clear indication that investors are starting to shake off the shock of last year and have regained some appetite for risk, says Hank Smith, chief investment officer of equity at Haverford Investments in Haverford, Penn.

See Boeing and four of the other cheapest stocks in the Dow

The problem now, Smith says, is that many bigger, "safer" shares have been left in the dust -- and that's keeping a lid on the Dow Jones Industrial Average. The forward P/E on this bastion of the bluest of blue-chip stocks stands at less than 14, down from nearly 18 in March, according to Dow Jones Indexes. So, in other words, as the broader market has gotten more expensive, the Dow has become cheaper.

Such low valuations could lead one to believe that the Dow is just chock-full of blue-chip bargains like the ones SmartMoney recently unearthed. In some cases, that's true. But sometimes cheap stocks are a steal and sometimes they re cheap for a reason.

Here, then, is a look at the cheapest stocks in the Dow as measured by forward P/E -- and whether these inexpensive bets are expected to become investor darlings or dogs in the next 12 to 18 months.

Forward P/E: 9.6
Five-Year Average P/E: 18.4
Discount to Five-Year Average: 48%

As the world's largest maker of commercial and military aircraft combined, few companies are as sensitive to a global slowdown as

(

). Of more immediate concern is the status of its vaunted 787 Dreamliner program, so woe unto Boeing shareholders when the company said Tuesday that the first test flight of the giant jet would be delayed -- yet again. "Boeing has got to get the 787 in the air," says Jefferies analyst Howard Rubel, who rates shares at Outperform. True, the airplane industry didn't go through the same vicious boom-and-bust cycle of previous recessions, Rubel points out, meaning Boeing could be in for a soft landing. Also favoring the company are opportunities for further cost cuts and -- with oil back up at $70 a barrel -- demand for newer, more fuel-efficient planes. For investors with three- to five-year horizons, Boeing looks compelling at these levels, but uncertainty over the 787, as well as a rebound in global air traffic in 2010, makes these shares look fairly priced over the next 12 to 18 months.

Boeing (BA)

Bottom Line: Dog

Forward P/E: 7.4
Five-Year Average Forward P/E: 13.7
Discount to Five-Year Average: 46%

The market's shift away from defensive stocks like health care and pharmaceuticals and the Obama administration's proposed health-care reform are just a couple of broader issues currently weighing on

s (

) shares. There are also company-specific issues -- disappointing sales of Singulair, Merck's No. 1 selling drug that treats asthma; increasing competition; patent expirations and a pipeline of drugs with poor prospects for FDA approval -- that have curbed the market's appetite for this stock, too. Fortunately the company's acquisition of

(

) should go a long way toward addressing many of the company's problems, including a poor drug pipeline and ability to remain competitive, says Morningstar analyst Damien Conover. "Merck greatly improved its long-term outlook by agreeing to acquire Schering-Plough," the analyst says.

Merck (MRK) Schering-Plough (SGP)

Bottom Line: Darling

Forward P/E: 6.6
Five-Year Average Forward P/E: 11.1
Discount to Five-Year Average: 41%

True,

(

) investors have plenty of uncertainty to grapple with these days: the $68 billion merger with

(

) and the fact that blockbuster cholesterol drug, Lipitor, will be going generic in just three years, to name just two. Nevertheless, the company's foundation remains solid based on strong cash flow from its diverse portfolio of drugs, says Morningstar's Conover. "I think one of the things keeping a lid on Pfizer is that it's a defensive stock, and as the market starts to accelerate there is a shift toward stocks that will outperform in up times," he says. There's also the overhang of the Obama administration's proposed

. "But I think the reform will be less severe than what the market fears," Conover says. And, if that's the case, it could even provide a catalyst for pharma stocks, he says.

Pfizer (PFE) Wyeth (WYE) health-care reform

Bottom Line: Darling

Forward P/E: 9.2
Five-Year Average P/E: 13.8
Discount to Five-Year Average: 33%

As the world's biggest personal computer and printer maker,

(

) has two knocks against it: Both its major markets aren't particularly attractive these days, says Kim Caughey, senior analyst at Fort Pitt Capital Group. "In the PC market H-P is fighting deflation," Caughey says. "Next year's hardware is always going to be faster, better, cheaper." As for the printer and printing business, well, prospects aren't so hot given that unemployment continues to rise, she says. (Fewer workers translate into less printing.) But even worse is what could happen to H-P's margins as the

(those cheap, tiny laptops) takes off. "I'm looking into people's pockets and I believe they will be sending their kids back to school with netbooks," says Caughey. "The margin on netbooks is terrible." Alas, that's part of the bigger problem with a company as consumer-focused as H-P: If folks don't have the money, they can't spend it -- and for that reason Caughey thinks H-P's shares, while valued at a low multiple, are unattractive.

Hewlett-Packard (HPQ) netbook craze

Bottom Line: Dog

Forward P/E: 7.7
Five-Year Average P/E: 8.4
Discount to Five-Year Average: 8%

(

), the insurance giant and newly-minted component of the Dow, has never traded at a big premium. Property & Casualty insurers historically don't, but there are other factors keeping Travelers from enjoying the same kind of multiple expansion found elsewhere in the market, says Keefe, Bruyette & Woods analyst Clifford Gallant, who rates the company's shares at Outperform. "Travelers [shares] never went down as much and so there was less of a rebound," he says. "It was viewed as a safe place to hide and now, particularly among institutional investors, it is being used as a source of funds." So if the market is selling Travelers to buy more cyclical stocks, what s to like? Stability. "Insurance is not a very sexy place but it is a pretty stable place right now, and to me, that is attractive," Gallant says.

Travelers (TRV)

Bottom Line: Darling