Stocks are expensive these days, so investors are looking for good deals in the market. Major stock market indexes are near all-time highs, and valuation ratios have also stretched toward the top ends of their historical ranges.
With fractional shares available from most brokerages, you don't have to concentrate on stocks that have low share prices. By itself, the share price doesn't have anything to do with the total value of a company. However, if you're looking for low-priced stocks that actually do offer good value, we've done some digging to find three interesting stocks that cost less than $10 a share.
1. Antero Midstream
Antero Midstream (NYSE: AM) is a master limited partnership (MLP) that was created to manage the midstream operations of Antero Resources (NYSE: AR) in the Appalachian region. Antero Midstream owns pipelines and infrastructure that are used in the gathering, transportation, and storage of the gasses and liquids associated with the production and transportation of natural gas.
Antero Midstream ultimately supports Antero Resources, so its strategy and results are closely tied to the parent company. Higher volumes drove revenue 13.6% higher in 2020, but the company is only forecasting low-single-digit growth rates over the next five years. The MLP is increasing capital expenditures to accelerate capacity growth. This is to support accelerated volume production growth by Antero Resources, but it will force the MLP to reduce its quarterly dividend in 2021. Even with the reduction, the dividend will be close to the amount of free cash flow that the company expects to produce. That means that there's not much wiggle room, and it's not a situation in which the company could simply increase shareholder distributions if it chose to do so.
Still, Antero Midstream pays a roughly 9.5% dividend yield, and it trades at a modest forward P/E ratio of 11.5. The market is pricing in a drastic dividend reduction or exceptionally slow dividend growth in the future. The MLP presents more opportunity than risk at this time, and shares are just under $10.
2. Radiant Logistics
Radiant Logistics (NYSEMKT: RLGT) is a shipping logistics company that partners with third parties to transport items that are often too large for the higher-profile freight carriers such as UPS and FedEx. Radiant's services include freight forwarding, brokerage, tracking, and consulting.
Radiant's annual revenue rose from $25 million in 2006 to $900 million in 2021 through organic growth and acquisitions. However, that rate of expansion has slowed in recent years, and the modest growth is forecast to continue in the foreseeable future. Earnings have outpaced sales due to efficiency improvements and gains from scale, but margins aren't expected to expand significantly moving forward.
Still, there are reasons to like Radiant. It's a well-run company that's succeeding in its niche. It has excellent financial health with regard to leverage and solvency. Most importantly, it's cheap. The stock trades with a forward P/E ratio of 11.7 and an enterprise-value-to-EBITDA ratio of 8.9. Those are low in comparison to its peers.
Radiant's cheap valuation and strong financial health could make it a premium acquisition target. The stock might also get attention from investors who start looking at smaller stocks as valuations rise among large-caps in other industries.
3. United Microelectronics
United Microelectronics (NYSE: UMC) is a relatively small microchip maker that's based in Taiwan. Semiconductor stocks can be highly cyclical, and the industry is currently experiencing some volatility. Higher than expected demand paired with supply chain disruptions led to a global chip shortage. Chipmakers like United Microelectronics are potential beneficiaries of this trend, as they can create components and enjoy some pricing power amid surging demand.
United Microelectronics is investing heavily to upgrade its production capacity. That has some investors worried that it's too late to the party, but some industry leaders are forecasting supply issues stretching beyond 2022. That would be great for the bull narrative.
The stock pays an annual dividend, which resulted in a healthy 3% yield earlier this month. Its 17.4 forward P/E ratio is in line with peers and its own historical range. These metrics suggest that there's still room for share prices to rise if United Microelectronics can take advantage of the chip supply shortage over the next year. Nothing is guaranteed in the cyclical and evolving semiconductor industry, but there's a combination of upside and fundamental stability here. That's rare for stocks in this price range.
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