3 Stocks Under $50 Walking a Fine Line
Stocks trading between $10 and $50 can be particularly interesting as they frequently represent businesses that have survived their early challenges. However, investors should remain vigilant as some may still have unproven business models, leaving them vulnerable to the ebbs and flows of the broader market.
This is precisely where StockStory comes in - we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. That said, here are three stocks under $50 to avoid and some other investments you should consider instead.
OPENLANE (OPLN)
Share Price: $35.03
Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE:OPLN) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.
Why Does OPLN Give Us Pause?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Underwhelming 3.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
OPENLANE is trading at $35.03 per share, or 24.9x forward P/E. Check out our free in-depth research report to learn more about why OPLN doesn’t pass our bar.
Eastern Bank (EBC)
Share Price: $19.85
Founded in 1818 as one of America's oldest mutual banks before converting to a public company in 2020, Eastern Bankshares (NASDAQ:EBC) operates as a bank holding company providing commercial and retail banking services primarily in Massachusetts, New Hampshire, and Rhode Island.
Why Does EBC Worry Us?
- Inferior net interest margin of 3.3% means it must compensate for lower profitability through increased loan originations
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 5.1% annually over the last five years
- Low return on equity reflects management’s struggle to allocate funds effectively
Eastern Bank’s stock price of $19.85 implies a valuation ratio of 1x forward P/B. Read our free research report to see why you should think twice about including EBC in your portfolio.
NOV (NOV)
Share Price: $20.73
With roots stretching back to 1862 when it began making equipment for early oil fields, NOV (NYSE:NOV) manufactures drilling rigs, drill bits, pumps, and other equipment used to drill oil and gas wells.
Why Do We Steer Clear of NOV?
- Annual sales declines of 3.3% for the past ten years show its products and services struggled to connect with the market during this cycle
- Costly operations and weak unit economics result in an inferior gross margin of 20.3% that must be offset through higher production volumes
- Low free cash flow margin of 3.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $20.73 per share, NOV trades at 21.1x forward P/E. If you’re considering NOV for your portfolio, see our FREE research report to learn more.
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