Lower priced stocks are known for their significant upside potential. Often times they are smaller capitalization companies or companies that have lost significant value. In this report we’ve picked 10 stocks under $10 that are currently showing technical strength, are attractively valued and provide adequate liquidity to trade.
1. Lannett Company, Inc. (LCI)
Price: $ 7.52
Market Cap: $ 292.93M
Dollar Volume (Price x 10-day Ave Volume): $ 7.42M
Lannett Company, Inc. develops, manufactures, markets and distributes generic versions of brand pharmaceutical products. It was founded in 1942 and is based in Philadelphia, Pennsylvania.
Price-to-Book (P/B): 0.92
Enterprise Value to EBITDA (EV/EBITDA): -5.10
Price-to-Sales Ratio (P/S): 0.43
Over the past year, LCI has lost significant value as it has posted unusually large expenses. As a result, the price has fallen to a point where the stock price is trading below the book value of the company. The median book value over the last 13 years for LCI has been 1.49, which would require over a 60% advance in the stock to reach that valuation. The P/S ratio is also trading below 1 and over the past 13 years the median P/S ratio is 1.28. If LCI were to return to historical P/S levels it would require nearly a 300% return on the stock from its current price. Because of the larger expenses, the current EV/EBITDA ratio is negative, but the company is posting positive non-GAAP earnings that strips out nonrecurring expenses.
Since the significant gap lower on August 20, 2018, the price has been fairly stable and has held its recent trading range over the next two earnings announcements. On January 7, 2019 the price was able to break a key resistance area near $6.45 on significant volume. That advance followed the retest of the $6.50 resistance following its November earnings report in which it surged on significant volume as well. The breakout above that level is an indication that the price will fill the August gap to trade around $13.
The higher volume is reflective of money coming into the stock as well as shorts covering their positions. As of January 14, 2019, the short interest is at 54.51% of the float and would require 8.83 days to cover based on its average volume. The size of the short interest is a positive for the stock as traders will have to buy the shares back to cover their short position. The size of the short position provides the potential for a significant short squeeze in which shares surge higher.
2. Valhi Inc. (VHI)
Price: $ 3.25
Market Cap: $ 1.1B
Dollar Volume (Price x 10-day Ave Volume): $ 1.34M
Valhi, Inc. is a holding company. The Company operates through three segments: Chemicals, Component Products, and Real Estate Management and Development. The company was founded in 1932 and is based in Dallas, Texas. Valhi, Inc. is a subsidiary of Contran Corporation.
Enterprise Value to EBITDA (EV/EBITDA): 3.92
Price-to-Sales Ratio (P/S): 0.61
The valuation metrics for VHI are very low relative to its historical averages. It is also generating strong return on assets (ROA) of 13.27% and return on equity (ROE) of 80.51%. Part of the reason for the disparity between ROA and ROE is the significant leverage that the company carries. As a result of the high debt, the book value is negative. However, the leverage also allows for more potential movement in the price of the stock. The current P/S ratio of 0.61 is below it’s the median value of 1.12 over the past 13 years. Also, the current EV/EBITDA of 3.92 is considerably below the median value of 16.70 over the past 13 years. If the price were to return to median valuations, that would indicate a potential moves in the price of the stock of 65% and over 400% respectively.
Since early October, the price of VHI had been forming a base that it broke out of on January 15. Since that breakout, the average volume has over doubled as the price surged from around $2.3 to near $4. The degree of movement and the on-balance volume (OBV) would indicate the near-term potential to retest the July trading range around $5. A similar breakout in 2017 caused the price to trade over $7 before consolidating for several months and then advancing to over $9.
3. Pier 1 Imports, Inc. (PIR)
Price: $ 0.91
Market Cap: $ 75.45M
Dollar Volume (Price x 10-day Ave Volume): $ 5.85M
Pier 1 Imports, Inc. is an importer of home decor and furniture. The Company’s operations consist of retail stores and an e-commerce Website conducting business under the name Pier 1 Imports, which sells a range of decorative accessories, furniture, candles, housewares, gifts and seasonal products. The company was founded in 1962 and is headquartered in Fort Worth, Texas.
Price-to-Book (P/B): 0.51
Enterprise Value to EBITDA (EV/EBITDA): -6.22
Price-to-Sales Ratio (P/S): 0.04
PIR is in the midst of a 3-year turnaround plan in which it intended to update stores and grow its e-commerce business. Those additional costs along with having to discount merchandise has caused the price to fall on hard times and the earnings to fall into negative territory. However, recent trends in foot traffic and search interest has begun to allow this stock to look up. The current P/B ratio of 0.51 is well below its 13-year median of 2.63. Also, the P/S of 0.04 is significantly below its 13-year median value of 0.49. If the price were to trade at those levels it would indicate potential moves of 374% and over 1200% respectively. That type of movement would indicate that their turnaround efforts would be successful but even lesser success could yield large returns in the stock.
After bottoming recently near $0.28, PIR has rallied to nearly $1 on significant volume. The 20-day average volume has gone from over 600K to over 8 million. Following the pullback on January 15, 2019 the price has again retested the $1 resistance area. Based on the initial movement off of the lows, the intermediate potential for PIR is between $2 to $3.50. Those values align with the 261.8% and 423.6% projections.
4. Callon Petroleum Co. (CPE)
Price: $ 7.91
Market Cap: $1.8B
Dollar Volume (Price x 10-day Ave Volume): $ 40.18M
Callon Petroleum Company is an independent oil and natural gas company. The Company is engaged in the exploration, development, acquisition and production of oil and natural gas properties. The company was founded in 1950 and is headquartered in Natchez, Mississippi.
Price-to-Book (P/B): 0.79
Enterprise Value to EBITDA (EV/EBITDA): 8.51
Price-to-Sales Ratio (P/S): 3.08
The price of CPE fell with the price of oil and natural gas, but prices have recently begun to stabilize. As a result, the valuations have come down for CPE and has brought the company’s P/S and EV/EBITDA back into alignment with its median levels historically. Currently, the company is trading below book value at 0.79 and is below the 13-year median level of 1.24. If the price began to trade at that level it would require over a 50% gain in the price of the stock. Since the other valuation measures are earnings based, an increase in the price of oil and natural gas or an increase in margins will allow those measures to make the stock an even better value.
CPE is currently forming a flag formation as continues to trade in a tight downward sloping channel since its January 10, 2019 high of $8.68. A breakout from this channel on expanding volume would be confirmation of this pattern with a potential target at just over $11. The support for this pattern is increased due to the strong, straight-line move that occurred off of its December low. The 261.8% Fib projection, based on the initial move, would indicate a potential intermediate term target for this stock at nearly $14.
5. Encana Corporation (ECA)
Price: $ 6.86
Market Cap: $6.54B
Dollar Volume (Price x 10-day Ave Volume): $ 163.2M
Encana Corporation, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids. Encana Corporation was founded in 1971 and is headquartered in Calgary, Canada.
Price-to-Book (P/B): 1.02
Enterprise Value to EBITDA (EV/EBITDA): 6.33
Price-to-Sales Ratio (P/S): 1.4
Similar to CPE, the price of ECA fell with the price of oil and natural gas, but prices have recently begun to stabilize as the price recently rallied from $5. The company is also engaged in the production of liquid natural gas, which has a large potential export market in Europe. The valuations have come down considerably and has allowed the EV/EBITDA to trade close to its 13-year average and below a typically value-oriented level below 10. The P/B ratio is at 1.04 and is well below its 13-year median value of 1.47. Also, the P/S ratio of 1.39 is well below its median value of 2.15. If the price were to return to these historical levels it would indicate a potential move of over 45% and 54% respectively.
ECA declined from around $14 to $5 with the drop in oil prices at the end of last year. The trend accelerated following the earnings on November 1 when they missed earnings estimates by $0.10. Since that announcement, the volume has increased tremendously and picked up with its most recent rally. As a result, the on-balance volume (OBV) has nearly recovered back to its November levels when the price was trading at over $9. Right now, the price is trading in a potential flag pattern as well, with a target, based on the initial move from $5 to $7. That pattern would be confirmed with a breakout above $7 on increased volume. The 261.8% and 423% Fib projection, based on the initial move, would provide an intermediate term target of $10.55 and nearly $14 respectively.
6. Vipshop Holdings Limited (VIPS)
Price: $ 7.52
Market Cap: $4.98B
Dollar Volume (Price x 10-day Ave Volume): $ 92.3M
Vipshop Holdings Limited is a holding company. The Company is an online discount retailer for brands in China. The Company offers branded products to consumers in China through flash sales mainly on its vip.com website. It was founded in 2008 and is headquartered in Guangzhou, the People’s Republic of China.
Price-to-Book (P/B): 2.01
Enterprise Value to EBITDA (EV/EBITDA): 11.15
Price-to-Sales Ratio (P/S): 0.40
With the recent slowdown in China, VIPS has felt the strain as it has fallen significantly from it 2018 high of around $19. Over the past year, VIPS has missed earnings estimates twice. The most recent miss occurred during its November earnings report. Following that report, the price gapped up slightly near $6, which it recently broke out of. That reaction is a potential indication that the negative outlook may be priced into the stock.
The current P/B ratio of 2.01 is well below its 9-year median value of 10.80. Also, the current P/S ratio of 0.40 is also below its 9-year median value of 1.18. The EV/EBITDA of 11.15 is over half of its 9-year median value of 23.10. While it may be difficult for VIPS to return to some of those higher valuations given the slowdown happening in china, there is a certainly an indication that it may restore some of that value. If the P/S ratio were to trade at one times sales it would be over a 100% increase from its current price.
VIPS broke out of a key resistance area near $6 on January 17 with substantial volume. The projection, based on the basing formation indicates a retest of the gap level from August 14, 2018 near $8.20. A break of that level would indicate that the price will likely fill the gap and potentially test its Fib 38.2% and 61.8% retracement levels between $10 and $13.50.
7. Gulfport Energy Corporation (GPOR)
Market Cap: $1.46B
Dollar Volume (Price x 10-day Ave Volume): $ 29.04M
Gulfport Energy Corporation is an oil and natural gas exploration and production company. The Company focuses on the exploitation and acquisition of natural gas, natural gas liquids and crude oil in the United States. The company was founded in 1997 and is headquartered in Oklahoma City, Oklahoma.
Price-to-Book (P/B): 0.45
Enterprise Value to EBITDA (EV/EBITDA): 3.30
Price-to-Sales Ratio (P/S): 1.12
GPOR is in a similar business as ECA but operates in a different location that has historically been a lower cost area to produce. Over the past 13 years, the median P/B value is 2.04 which is over four times the current value of 0.45. Similarly, the 13-year median value for P/S is 5.15 that is also over four times its current value of 1.12. The current EV/EBITDA of 3.30 is less than half of the 13-year median value of 7.8. If the stock were able to return to its median value for EV/EBITDA it would require a move of over 136%.
GPOR is in the process of forming a rather large inverted head and shoulders pattern since mid-November. The measured move for this pattern is from the December 11 high to the December 26 low, which is nearly a $4 move. A breakout above $9.25 on increasing volume would be a potential confirmation of that pattern with a target of $13.25. That would mean retesting is July 2018 high. The significant amount of volume occurring along the neckline of this pattern is certainly an indication that it may have the potential to move significantly if broken.
8. Keane Group, Inc. (FRAC)
Price: $ 8.42
Market Cap: $1.46B
Dollar Volume (Price x 10-day Ave Volume): $ 29.04M
Keane Group, Inc. is provider of integrated well completion services in the United States, with a focus on demanding completion solutions. The Company’s segments include Completion Services, which comprises hydraulic fracturing and wireline divisions, and Other Services, which consists of coiled tubing, cementing and drilling divisions. It was founded in 1973 and is headquartered in Houston, Texas. Keane Group, Inc. is a subsidiary of Keane Investor Holdings LLC.
Price-to-Book (P/B): 2.04
Enterprise Value to EBITDA (EV/EBITDA): 3.45
Price-to-Sales Ratio (P/S): 0.52
FRAC is an oil service company that relies more on the level of production from the wells it services rather than the actual price of oil. Given the significant leverage of most oil production companies carry, the need to produce, even at lower prices, is significant. The current P/B of 2.04 is lower than its 4-year median value of 3.46. The current P/S of 0.52 is over half of the 4-year median P/B of 1.11. While the EV/EBITDA of 3.39 is less than half of the 4-year median value of 7.55. A return to those median values would produce moves in excess of 73%.
FRAC is also forming a potential inverted head and shoulders pattern since November. A breakout above $9.81 on increasing volume would be confirmation with a potential target around $12.25. The target is based on the down-move from December 13 to December 26 added to the breakout level. That target would mean that the price would test the 38.2% Fib retracement of the 2018 downtrend, with a typical retracement carrying from that level to the 61.8% retracement level near $15.
9. Tile Shop Holdings, Inc. (TTS)
Price: $ 7.43
Market Cap: $393.06M
Dollar Volume (Price x 10-day Ave Volume): $ 2.48M
Tile Shop Holdings, Inc. is a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States. It was founded in 1985 and is headquartered in Plymouth, Minnesota.
Price-to-Book (P/B): 2.61
Enterprise Value to EBITDA (EV/EBITDA): 10.18
Price-to-Sales Ratio (P/S): 1.12
Following a difficult 2017, the price has stabilized more over its last three earnings reports. Since January 1 the price has surged significantly, but the valuations have remained competitive relative to historical levels. The current P/B of 2.62 is just off the lowest value of the past 8 years and is lower than its median value over that period of 6.83. Similarly, the P/S ratio is just off its 8-year low of 0.79 and is significantly lower than its median value over that period of 2.67. The current EV/EBITDA of 10.18 is lower than its 8-year median value of 14. If the P/B and P/S were to return to historical levels it would mean that the price would be back near its 2013 levels between $25-$30 a share. Assuming EBITDA remains the same, if EV/EBITDA returned to historical averages it would indicate at least a 40% higher than where its currently trading.
TTS was able to find support again near $5.25, which it also tested in early 2018. The 2019 rally has carried the price without any retracement along the way. As of January 14, 2019, the short interest was at 8.61% of the float. Based on the average volume, it would take 5.83 days to cover those positions. This level of short interest has the potential to provide additional momentum as short-covering may have been responsible how quickly the price has advanced in the past month. The price appears poised to retest its July high near $9.50 and a breakout above that level would complete the formation of a long-term double bottom pattern with a potential target near $14.
10. Companhia Siderurgica Nacional ADR (SID)
Price: $ 2.92
Market Cap: $4.08B
Dollar Volume (Price x 10-day Ave Volume): $ 6.77M
Companhia Siderúrgica Nacional operates as an integrated steel producer in Brazil. It operates through five segments: Steel, Mining, Logistics, Cement, and Energy. It was founded in 1941 and is headquartered in Itaim Bibi, Brazil. Companhia Siderúrgica Nacional is a subsidiary of Vicunha Aços S.A.
Price-to-Book (P/B): 2.04
Enterprise Value to EBITDA (EV/EBITDA): 5.58
Price-to-Sales Ratio (P/S): 0.73
The political difficulties in Brazil have contributed to a lot of weakness in companies that are headquartered there. Some of the optimism surround the new government and the potential for a weak U.S. dollar relative to the Brazilian Real may provide additional upside for Brazilian companies. As a result of the recent weakness, the P/B is trading near it’s 13-year median value of 2.09. The current P/S of 0.73 is trading below its 13-year median value of 0.91. Also, its current EV/EBITDA of 5.58 is considerably below its 13-year median value of 9.80. Any rebound in material costs in Brazil would also improve this company’s earnings-based valuation ratio if earnings and revenues begin to rise. A return of the price to median valuations would indicate a 25% to 75% increase in the price of the stock.
SID is in the process of completing a major reversal pattern as it is currently breaking its $2.75 resistance on high volume. The $0.80 range would provide a price target of $3.55, which would carry it back to its 2018 highs. The on-balance volume during this basing formation since last summer has been rising. That is an indication that investors have been accumulating the stock over that period and provides for a potentially larger move.