3 Stocks Under $50 We Think Twice About

Yahoo

3 days ago

The $10-50 price range often includes mid-sized businesses with proven track records and plenty of growth runway ahead. They also usually carry less risk than penny stocks, though they're not immune to volatility as many lack the scale advantages of their larger peers.
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.
Hormel Foods (HRL)
Share Price: $29.24
Best known for its SPAM brand, Hormel (NYSE:HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.
Why Are We Wary of HRL?
Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 16.7%
Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 6.5% annually, worse than its revenue
Hormel Foods's stock price of $29.24 implies a valuation ratio of 16.9x forward P/E. Check out our free in-depth research report to learn more about why HRL doesn't pass our bar.
Simply Good Foods (SMPL)
Share Price: $33.39
Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ:SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.
Why Are We Hesitant About SMPL?
Smaller revenue base of $1.46 billion means it hasn't achieved the economies of scale that some industry juggernauts enjoy
Estimated sales growth of 1.5% for the next 12 months implies demand will slow from its three-year trend
Capital intensity has ramped up over the last year as its free cash flow margin decreased by 5.5 percentage points
Simply Good Foods is trading at $33.39 per share, or 16.6x forward P/E. Read our free research report to see why you should think twice about including SMPL in your portfolio, it's free.
TaskUs (TASK)
Share Price: $17.06
Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ:TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.
Why Does TASK Give Us Pause?
Sales trends were unexciting over the last two years as its 1.8% annual growth was below the typical business services company
Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Underwhelming 5.4% return on capital reflects management's difficulties in finding profitable growth opportunities
At $17.06 per share, TaskUs trades at 12.2x forward P/E. Dive into our free research report to see why there are better opportunities than TASK.
Stocks We Like More
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