Stocks in the $10-50 range offer a sweet spot between affordability and stability as they’re typically more established than penny stocks. But their headline prices don’t guarantee quality, and investors should exercise caution as some have shaky business models.
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.
Himax (HIMX)
Share Price: $12.33
Taiwan-based Himax Technologies (NASDAQ:HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.
Why Is HIMX Risky?
- Annual sales declines of 1.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Himax is trading at $12.33 per share, or 49x forward P/E. To fully understand why you should be careful with HIMX, check out our full research report (it’s free).
Yum China (YUMC)
Share Price: $48.79
One of China’s largest restaurant companies, Yum China (NYSE:YUMC) is an independent entity spun off from Yum! Brands in 2016.
Why Does YUMC Fall Short?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.2% over the last seven years was below our standards for the restaurant sector
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Gross margin of 20.3% is below its competitors, leaving less money for marketing and promotions
Yum China’s stock price of $48.79 implies a valuation ratio of 16x forward P/E. Dive into our free research report to see why there are better opportunities than YUMC.
Lamb Weston (LW)
Share Price: $43.50
Best known for its Grown in Idaho brand, Lamb Weston (NYSE:LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Why Do We Think LW Will Underperform?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales decline of 1.2% for the next 12 months points to a tough demand environment ahead
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
At $43.50 per share, Lamb Weston trades at 15x forward P/E. To fully understand why you should be careful with LW, check out our full research report (it’s free).
Stocks We Like More
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