Stocks trading in the $1-10 range are generally smaller players with less risk than their penny stock counterparts. But that doesn’t mean the underlying businesses are cheap, and we advise caution as many have questionable fundamentals.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three stocks under $10 to avoid and some other investments you should consider instead.
Amplitude (AMPL)
Share Price: $6.84
Born from the realization that companies were flying blind when it came to understanding user behavior in their digital products, Amplitude (NASDAQ: AMPL) provides a digital analytics platform that helps businesses understand how people use their digital products to improve user experiences and drive revenue growth.
Why Does AMPL Fall Short?
- Below-average net revenue retention rate of 103% suggests it has some trouble expanding within existing accounts
- Persistent operating margin losses suggest the business manages its expenses poorly
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 5.5% for the last year
Amplitude is trading at $6.84 per share, or 2.1x forward price-to-sales. Read our free research report to see why you should think twice about including AMPL in your portfolio.
Commercial Vehicle Group (CVGI)
Share Price: $4.60
Formed from a partnership between two distinct companies, CVG (NASDAQ: CVGI) offers various components used in vehicles and systems used in warehouses.
Why Do We Steer Clear of CVGI?
- Sales tumbled by 3.5% annually over the last five years, showing market trends are working against it during this cycle
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 36.2% annually, worse than its revenue
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Commercial Vehicle Group’s stock price of $4.60 implies a valuation ratio of 8.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CVGI doesn’t pass our bar.
Transocean (RIG)
Share Price: $5.06
Operating one of the world's most capable fleets of ultra-deepwater drillships and harsh environment rigs, Transocean (NYSE: RIG) operates drilling rigs that energy companies rent to drill oil and gas wells in deep ocean waters.
Why Do We Avoid RIG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.7% annually over the last ten years
- Gross margin of 37.9% is below its competitors, leaving less money to invest in exploration and production
- Low free cash flow margin of 4.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $5.06 per share, Transocean trades at 27.6x forward P/E. To fully understand why you should be careful with RIG, check out our full research report (it’s free).
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