You get what you pay for and that applies to the equities sector as well. Sure, you can always filter for ideas that are cheap in price. The problem with this approach is that, more often than not, you’re also getting cheap businesses. What’s worse, these entities can get even cheaper – that’s not what you want as an investor. Fortunately, there are many compelling ideas among stocks to buy under $10.
A key mathematical benefit to equities in this price class is the law of small numbers. When you’re dealing with single digits, it’s possible that modest news items can dramatically boost the underlying share price. Also, ideas in this category tend to be growth-driven plays that respond more aggressively to positive developments. Of course, the opposite is also true so you do need to be wary of unexpected headwinds.
Another factor that bolsters the case for stocks to buy under $10 is retail participation. Let’s face it – it’s much easier to convince regular folks to acquire shares that are $10 rather than $100. So, when positive news breaks, the intense rush into the company can potentially skyrocket its valuation.
With that in mind, below are three stocks to buy under $10.
Similarweb (SMWB)
A global software development and data aggregation company, Similarweb (NYSE:SMWB) specializes in various services. In particular, it focuses on web analytics, web traffic and digital performance. Since the start of the year, SMWB stock has gained almost 37% of equity value. However, since March, it has noticeably lost momentum. Still, this could be an opportunity for stocks to buy under $10.
At the moment, SMWB stock trades hands at 2.52X trailing-year sales. That’s just below the average of 2.53X seen between the first quarter of last year to Q1 of this year. What’s more, Similarweb is significantly undervalued relative to the application software space, which runs an average multiple of 4.14X. Therefore, the company has room to expand into a fair valuation point.
Moreover, analysts see sustained growth ahead. In fiscal 2024, sales could rise to $244.76 million, implying a growth rate of 12.3%. The high-side target calls for revenue of $247 million. Looking to the following year, the top line may jump to $278.3 million, up 13.7%. That makes SMWB an intriguing idea for stocks to buy under $10.
Kinross Gold (KGC)
Falling under the basic materials sector, Kinross Gold (NYSE:KGC) runs an “upstream” gold-mining business. That means it’s engaged in the acquisition, exploration and development of gold properties. These projects are located in the U.S., Brazil, Chile, Canada and Mauritania. Fundamentally, the Federal Reserve potentially about to shift its monetary policy to a dovish framework may lift KGC due to the inflationary implications.
To be fair, KGC stock right now trades at 2.54X sales. In the past year, this metric sat at 1.69X. Relatively speaking, Kinross appears overvalued. However, the gold industry runs an average revenue multiple of 3.14X. Therefore, even with KGC’s recent robust rally, it still has room to grow.
For fiscal 2024, analysts are targeting sales of $4.7 billion. If so, that would be up 11% from the prior year’s result of $4.24 billion. The high-side target calls for sales of $5 billion. What’s perhaps most impressive is that the least-optimistic view still comes in at $4.45 billion.
Combined with the forward dividend yield of 1.33% and a favorable fundamental backdrop, KGC is one of the stocks to buy under $10.
Baytex Energy (BTE)
Based in Canada, Baytex Energy (NYSE:BTE) falls under the oil and gas exploration and production segment of the hydrocarbon value chain. As mentioned earlier, this segment is known as upstream. Fundamentally, geopolitics could play a huge role in the price action of BTE stock. With western nations needing more reliable sources of fossil fuels, Baytex just might get very intriguing.
Another factor to consider here is the valuation. Currently, the market prices BTE stock at 1.03X trailing-year sales. That matches the ratio seen during the past year and that’s a very good thing. The upstream energy sector’s average price-to-sales ratio stands at 2.15X. Thus, plenty of room exists for Baytex to run.
Indeed, analysts are looking for sales to hit $2.8 billion by year’s end. If so, that would represent a gargantuan growth rate of 40.7% from last year’s haul of $1.99 billion. The high-side estimate calls for sales of $3.22 billion.
It’s also worth pointing out that Baytex offers a forward dividend yield of 1.77%. Thus, it makes a sensible idea for stocks to buy under $10.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
