As interest rates continue to rise, sticking to value rather than growth remains the best decision. Among dozens of value stocks, some of the best value stocks are cheap stocks under $10 per share.
These undervalued and overlooked stocks are attractive in today’s market for two reasons. First, if rates continue to rise, putting pressure on valuations, these stocks, which are already selling at multiple lows, have far less room to drop than many other names.
Second, whenever the market rallies (either because the Federal Reserve defeats inflation or because the Fed retreats by cutting rates), these names can recoup more than the entire stock market. Like a Bloomberg commentator recently opined that after a long period of underperformance, value stocks could have plenty of room for improvement.
With that in mind, you might want to consider adding a number of these seven cheap stocks under $10 to your portfolio. All are heavily undervalued, based on their current and future prospects.
|CNTY||Casinos of the century||$7.90|
|TSQ||Town Square Media||$7.65|
Best Cheap Stocks Under $10: Century Casinos (CNTY)
Previously I recommended Casinos of the century (NASDAQ:CNTY) as a microcap value stock with high potential gains. Falling gaming stocks have sent CNTY down 35% so far this year.
While an economic downturn will likely impact the gaming industry, this regional casino operator may not be as affected as operators of gaming resorts. And compared to other regional casino stocks, CNTY stock is cheap. The shares are trading at 10.2 times its trailing earnings, a multiple well below that of its larger peers. For instance, at Bally’s (NYSE:BALY), trades for 21.6 times earnings.
CNTY also has a positive catalyst, in the form of its strategy of shrewd acquisitions of gaming properties. As noted in the company’s latest investor presentation, Century has two pending deals that can improve its profitability.
Vaalco Energy (EGY)
With no end in sight to high fossil fuel prices, energy stocks could continue to outperform the stock market. One way to play this trend is to buy cheap stocks under $10 in the energy sector, like Vaalco Energy (NYSE:EGY).
If you’re looking to bet crude oil prices will stay near multi-year highs, EGY stock is a good name to buy. Why? Vaalco recently entered into a merger with another junior energy exploration and production (or E&P) company, TransGlobe.
Assuming the tight oil supply outweighs a drop in demand due to the recession and oil prices remain stable or increase, this transaction could be extremely profitable for EGY shareholders. An analyst believes that, largely because of this agreement. Vaalco’s earnings per share will nearly double from 78 cents this year to $1.80 per share next year,
Evolution Oil (EPM)
Along with EGY, another cheap energy stock to consider is Oil Evolution (NYSEAMERICAN:EPM). Look up EPM on a stock screener, and straight away you can tell it’s a value play.
EPM shares are selling for only 5.3 times forward earnings, at the bottom of earnings multiples for oil and gas stocks. The shares also have a high forward dividend yield of 6.1%. Not only that, but similar to the situation with Vaalco, Evolution’s acquisition strategy can significantly increase its stock.
Like a Looking for Alpha commentator argued last month, Evolution’s purchase of various oil and gas assets between 2019 and 2022 has begun to bear fruit. High energy prices have led to a sharp increase in the profitability of these assets. The company can use this increased cash flow to pay down debt. It could also indicate that EPM may maintain and possibly increase its dividend.
Best Cheap Stocks Under $10: Geo Group (GEO)
After surging last summer, on news from investor Michael Burry (of “The Big Short” fame) do Geographic group (NYSE:GEO) its only title, GEO, has remained stable in recent months. However, don’t think that means stocks have peaked.
The recovery of this private prison operator is only beginning to take shape. As reported in Geo’s latest quarterly earnings release (which was released on October 27), the company has made major progress in its deleveraging efforts, paying down debt using its cash flow and sales of assets.
As this restructuring continues, GEO stock, which still boasts a very cheap seven-earnings multiple, is expected to rise significantly should the market reprice. That said, there may also be a chance for this stock to zoom much sooner. As InvestorPlace Columnist Josh Enomoto pointed out in September that a “red wave” in the 2022 midterm elections could spark another rally in stocks.
Koss Corporation (KOSS)
During 2021, Koss Company (NASDAQ:KOSS) went “over the moon” and back, following this once-obscure consumer electronics stock that briefly became a “meme-stock” crowd favorite. With the “meme mania” for a long time, KOSS has returned to single-digit prices.
It’s an overstatement to say that KOSS stock may one day regain its peak of $64 per share, but the stock could rebound. Instead of a short squeeze, the stock could be boosted by the company’s successful patent litigation efforts. In July, Koss settled its patent lawsuit against Apple (NASDAQ:AAPL). The lawsuit centered on a patent dispute over wireless headphones
Terms of the settlement were not disclosed. But according to its latest 10-Q filing, Koss earned $33 million in “other revenue,” dubbed “licensing proceeds,” last quarter. Koss still has ongoing lawsuits with other helmet manufacturers. Similar settlements could follow, potentially boosting the stock which only has a market capitalization of $61.5 million.
Lincoln Educational Services (LINC)
Lincoln Educational Services (NASDAQ:CLICK) is a for-profit professional training service provider. The company operates 22 schools in 14 states under various names, including Lincoln Technical Institute.
LINC stock has had a mixed performance in recent months. Stocks have been trending higher recently, but if Lincoln’s upcoming quarterly results and guidance fail to meet analysts’ expectations, as they did last quarter, stocks could pull back further. So what makes it a cheap stock worth considering?
The company is currently in full recovery. By moving toward a hybrid in-person/online learning model and seeking to take advantage of the “intermediate skills” gap in the U.S. labor market, LINC could show significantly better operating results over the course of of the next quarters.
The average analyst estimate is for earnings per share to rise from 44 cents this year to 63 cents in 2023. That’s likely enough to help bring this stock back to double-digit price levels.
Best Cheap Stocks Under $10: Townsquare Media (TSQ)
Town Square Media (NYSE:TSQ) is one of many broadcast stocks that trade for less than $10 per share. Most radio stocks are currently trading at depressed valuations, due to concerns over slowing demand from the advertising market, as well as limited growth prospects for this mature industry.
However, TSQ stands out as a radio value with high potential to emerge from its prolonged slump. The company has successfully transformed into a more digitally-focused company. In fact, Townsquare’s digital unit is now as big as its radio business.
Additionally, the fact that Townsquare operates in relatively high-profile markets, where there is less competition for local advertising dollars, is another positive trait. TSQ’s profits could continue to rise steadily, despite operating in a “dinosaur” industry. Over time, Wall Street could catch up and give this high-value stock (trading for just four times its earnings) a higher valuation.