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. Keeping that in mind, here are three stocks under $50 to avoid and some other investments you should consider instead.
Monro (MNRO)
Share Price: $13.76
Started as a single location in Rochester, New York, Monro (NASDAQ:MNRO) provides common auto services such as brake repairs, tire replacements, and oil changes.
Why Is MNRO Risky?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Monro is trading at $13.76 per share, or 59.3x forward P/E. Check out our free in-depth research report to learn more about why MNRO doesn’t pass our bar.
Callaway Golf Company (CALY)
Share Price: $13.63
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE:CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Do We Steer Clear of CALY?
- Annual revenue declines of 2.5% over the last five years indicate problems with its market positioning
- Projected 11.5 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- Stagnant returns on capital show management has failed to improve the company’s business quality
At $13.63 per share, Callaway Golf Company trades at 15.4x forward P/E. Read our free research report to see why you should think twice about including CALY in your portfolio.
PROG (PRG)
Share Price: $30.52
Evolving from its origins as Aaron's, Inc. before rebranding in 2020, PROG Holdings (NYSE:PRG) provides alternative payment solutions including lease-to-own options and second-look credit products for consumers who may not qualify for traditional financing.
Why Do We Pass on PRG?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Earnings per share fell by 4.3% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Tangible book value per share tumbled by 35% annually over the last five years, showing financials sector trends are working against it during this cycle
PROG’s stock price of $30.52 implies a valuation ratio of 6.2x forward P/E. If you’re considering PRG for your portfolio, see our FREE research report to learn more.
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