Finding the best cheap stocks under $10 in these market conditions can be worth your while.
This was a challenging year for investors, and challenges are likely to continue into 2023. Factors such as inflation, interest rates, and the economic slowdown point to more uncertainty ahead for the markets. Still, that doesn’t mean you should skip out on some plays perceived to be risky, such as the best cheap stocks under $10 per share.
Yes, riskier plays such as speculative growth stocks have been hammered over the past twelve months, and could continue to drop in price. However, that may not necessarily be the case with stocks trading at both a low stock price, as well as a relatively-low earnings multiple.
Already trading at discounted prices, additional market volatility may have a less severe impact compared to pricier stocks. Not only that, given their low valuations, as well as company-specific catalysts, the top names in this category have a strong chance of making an outsized move higher, when the overall stock market begins to recover.
That’s the case here with these seven best cheap stocks under $10 per share. Each one offers investors a very favorable risk/reward proposition at current prices.
|NYCB||New York Community Bancorp||$1.94|
|UTI||Universal Technical Institute||$6.23|
Arcos Dorados (ARCO)
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Arcos Dorados (NYSE:ARCO) is the world’s largest operator of McDonald’s (NYSE:MCD) restaurants. This company is the master franchisee for the famed fast food franchise in 20 Latin American and Caribbean countries.
ARCO stock performed very well during 2022, rising nearly 35.5%, compared to the overall stock market’s double-digit declines. Yet despite ARCO’s big move higher, shares continue to trade at a reasonable valuation (13 times earnings). Even though it has a value stock multiple, the restaurant operator continues to report strong growth. Sell-side analysts anticipate steady earnings growth to carry on for the next few years.
ARCO also pays out a steady dividend (forward yield of 1.84%), reinstated earlier this year after a pause during the pandemic. Dividend growth has been nonexistent, but with a payout ratio of less than 25%, and the prospect of earnings growth, this payout could be raised over time.
Century Casinos (CNTY)
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It makes sense why investors may still be on the fence about Century Casinos (NASDAQ:CNTY). As the chances of a recession keep rising, the gaming operator’s existing operations could be affected, all while it closes on two pending acquisitions.
However, with CNTY stock trading for just 13.6 times earnings, much of this uncertainty is likely priced into shares. Not only that, according to Roth Capital’s Edward Engel, Century’s forthcoming purchases of the Nugget in Sparks, Nevada, as well as the operations of the Rocky Gap Casino in Flintstone, Maryland, still stand to pay off for investors.
That is, these acquisitions will help to boost the CNTY’s free cash flow. In addition, there may be further upside, if the company is able to institute operational improvements. These factors may enable the stock (knocked lower by 44.1% this year) to bounce back with a vengeance, when market conditions improve.
Evolution Petroleum (EPM)
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With oil and gas prices falling back in recent months, why is Evolution Petroleum (NYSEAMERICAN:EPM) one of the best cheap stocks under $10 per share? Chalk it up to this energy exploration company’s low valuation (6.7 times earnings), high dividend yield, and potential to level up on its 2022 success.
EPM stock has gained by around 45.4% year-to-date, as the run up in oil and gas prices drove a massive jump in profitability. Evolution has used this big increase in cash flow to not only maintain its high dividend (6.37% yield), but to pay down debt as well.
As a Seeking Alpha commentator recently argued, earnings growth could continue. Even if energy prices fail to take off again anytime soon, EPM’s earnings per share (or EPS) could keep on growing. This is due to potential value-creation efforts such as share repurchases and acquisitions.
After soaring in November following a well-received quarterly earnings report, Immersion (NASDAQ:IMMR) has pulled back in recent weeks. The patent licensing firm’s shares could remain under pressure in the near-term, as investors take profit. Still, another spike could happen down the road.
IMMR stock has two potential catalysts. First, the possible windfall from the company’s suit against Meta Platforms (NASDAQ:META), for alleged infringement on some of its haptic (or 3D touch) technology patents. Second, even if Meta rather than Immersion prevails in this patent suit, IMMR remains poised to experience further earnings growth.
Demand for its haptic patents keeps rising. Big tech continues to increase its presence in the world of augmented reality/virtual reality (or AR/VR) technology. Trading for just 12 times estimated 2022 earnings, IMMR is a low-priced stock with high growth potential. This makes it a buy at today’s prices.
New York Community Bancorp (NYCB)
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New York Community Bancorp (NYSE:NYCB), which I argued was a great value play earlier this year, has admittedly been a bit of a value trap in recent months. Despite its high dividend (7.86%), and a low earnings multiple (7) compared to other community banking stocks, shares have yet to really take off.
Still, that doesn’t mean that the NYCB stock slump will carry on in the years ahead. Last month, NYCB finally received regulatory approval for its Flagstar Bancorp (NYSE:FBC) merger, enabling the transaction to close on Dec. 1. While not happening immediately, in time this deal could have a big positive impact on the stock.
Now more diversified, both geographically and in terms of its loan portfolio, NYCB is better-positioned to maintain its high dividend, and possibly increase its earnings, in the years ahead. Shares could also receive a valuation boost from these improvements.
Pitney Bowes (PBI)
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Pitney Bowes (NYSE:PBI) is a penny stock I’ve talked about many times recently. Primarily, due to the activist investor catalyst that has emerged over the past few months. Hedge fund Hestia Capital, which made a name for itself after its involvement with GameStop (NYSE:GME), now has its sights set on this business products company.
Launching a proxy fight, Hestia wants to take over the board, and then implement changes that could unlock the stock’s underlying value. This plan entails divesting Pitney Bowes’ unprofitable Global Ecommerce segment. This will enable management to focus on, and improve the profitability of, the company’s core SendTech postage meter and shipping level segment.
Although not a lock that the activist prevails, the potential upside from Hestia taking over and instituting these chances may far outweigh downside risk, making PBI stock worth a look as a small, speculative position.
Universal Technical Institute (UTI)
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Universal Technical Institute (NYSE:UTI) shares have declined by around 20% this year. Shares tumbled again earlier this month after the trade school operator’s latest earnings report, despite the results coming in ahead of analyst forecasts.
Sure, this may be because UTI is guiding for a drop in net income next year, despite a big expected increase in student enrollment and revenue. Even so, although not translating into earnings growth at first, the growth of Universal Technical Institute’s operations could start to have a positive impact on earnings during Fiscal Year 2024 (FY24, fiscal year ending September 2024).
Analyst forecasts call for EPS to jump from 11 cents in FY23, to 67 cents in FY24. Achieving this is likely enough to send UTI stock back up to prices above $10 per share, from current levels (around $6.25 per share). This makes UTI worth considering, now or on further weakness.
On the date of publication, Thomas Niel did not hold (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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.