Stocks trading in the $1-10 range are generally smaller players with less risk than their penny stock counterparts. But that doesn’t mean the underlying businesses are cheap, and we advise caution as many have questionable fundamentals.
The bad behavior exhibited by lower-quality companies in this space can spook even the most seasoned professionals, which is why we started StockStory - to separate the good from the bad. Keeping that in mind, here are three stocks under $10 to swipe left on and some alternatives you should look into instead.
Designer Brands (DBI)
Share Price: $5.51
Founded in 1969 as a shoe importer and distributor, Designer Brands (NYSE: DBI) is an American discount retailer focused on footwear and accessories.
Why Do We Avoid DBI?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Earnings per share have dipped by 78.2% annually over the past three years, which is concerning because stock prices follow EPS over the long term
- 11× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Designer Brands’s stock price of $5.51 implies a valuation ratio of 16.9x forward P/E. Check out our free in-depth research report to learn more about why DBI doesn’t pass our bar.
AdaptHealth (AHCO)
Share Price: $10.66
With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ: AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Why Is AHCO Not Exciting?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Issuance of new shares over the last five years caused its earnings per share to fall by 6.4% annually while its revenue grew
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $10.66 per share, AdaptHealth trades at 9.7x forward P/E. If you’re considering AHCO for your portfolio, see our FREE research report to learn more.
Ocular Therapeutix (OCUL)
Share Price: $8.84
Pioneering a drug delivery platform that can eliminate the need for monthly eye injections, Ocular Therapeutix (NASDAQ: OCUL) develops sustained-release treatments for eye diseases using its proprietary ELUTYX bioresorbable hydrogel technology that gradually releases medication.
Why Are We Out on OCUL?
- Annual sales declines of 5.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 340.5 percentage points
- Free cash flow margin shrank by 264.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Ocular Therapeutix is trading at $8.84 per share, or 35.6x forward price-to-sales. Read our free research report to see why you should think twice about including OCUL in your portfolio.
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ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
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