As the American Stock market is trading in its lifetime high owing to the ongoing vaccination, recovery in economic activities, and earnings growth of companies, it’s a tuff call to pick the best stocks to buy now under $50 that are fundamentally strong.
If you are hunting high and low for the best stocks to buy now under $50, then you are in the right place.
Let’s delve deeper into the best growth stocks under $50.
10 Parameters you should check to pick the best stocks to buy under $50
With a few hundred dollars in the trading account, retail investors hunt high and low for cheaper stocks. But the bitter truth is that don’t invest in any stock solely because its market price is relatively lower. Instead, run independent research and include those stocks that are with robust fundamentals.
Parameter #1. Debt to Equity Ratio
The debt to equity ratio reveals what liabilities a company has in comparison to the total shareholder’s equity. Once the total liabilities of the company is divided by the shareholder equity, you will find the debt to equity ratio of the company or corporation.
When you analyze the debt to equity ratio then you will come to know that to what extent the company has external debt. Apart from that, check carefully whether the shareholders’ capital is able to cover all the outstanding debts on the balance sheet or not in the scenario of a business downturn that results in deep in earnings.
Since the debt to equity ratio varies from sector to sector, it’s a tuff call to pinpoint a debt to equity ratio. As a good rule of thumb, it’s a wise decision to invest in those companies that are either debt-free or have a debt to equity ratio lower than 1.
Parameter #2. Profit Margin
Irrespective of the sector the company operates, before investing even in the companies in the hottest industries or sectors investigate the degree of profit a company makes by running a business operation. When you analyze the profit margin you will find what cent of profit the company is making when the total sale of the company stands at $1 in a financial year.
For example, if a business has delivered a 17% profit margin in the last financial year, then it’s as clear as the sky is blue that the company has made 17 cents of profit when the total sales generated by the company is $1 in the last financial year.
The higher the profit margin is, the better the financial health of the company is. Plus, a double-digit profit margin discloses the management’s efficiency to deliver the profit by utilizing the available capital from running a business.
Since the profit margin varies from sector to sector, as a good rule of thumb, invest in those companies of which profit margins are higher than 15% during the past 5 years.
Parameter #3. Earnings per Share
To gauge a corporation’s profitability, take a close look at Earnings per Share. Once the Net profit made by the company either in a quarter or in a financial year is divided by the total common shares of the company, you will find the EPS of a corporation.
When the EPS of the corporation is higher than those companies that are operating in the same industry, this signals that the investors are willing to pay a higher price if they find that a stock is relatively cheap as compared to the profit delivered by the company in a financial year. Simply put, the EPS reveals what investors are willing to pay to own the share of the company for each dollar of earnings in a financial year or a quarter.
However, it’s a tuff call to deliver a ‘good’ EPS. For the best answer, check out the earnings results of the company during the past 5 years and compare the EPS of the company along with its competitors, etc.
Parameter #4. Dividend Payout
When you are looking for those companies that regularly provide a steady income source that will be credited in your bank account, then invest in those companies that operate in healthcare, food and beverages, utilities, etc. sectors, because they have a track record of paying dividends regularly.
Before investing in dividend-paying stocks take a close look at whether the company has delivered a double-digit earnings growth during the past 5 years or not and to what extend the profit is eroded towards debts the company has.
Parameter #5. Return on Equity
Return on Equity measures what is the net profit made by a company in a financial year from the available shareholders’ equity.
Once the net income made by a corporation in a financial year is divided by the stockholders’ equity, you will find the Return on Equity.
Alike EPS, the Return on Equity varies from one sector to another. For example, the average ROE of the utility players could be 10% or lower and the technology or retail company’s ROE may stand at 15% and higher. That’s why before investing in any stock, analyze what’s the average ROE of the sector/industry and invest accordingly. It’s the best idea to invest in that stock the ROE of which is higher than the industry peers. As a good rule of thumb, invest in those companies where ROE stands at 15% and higher.
Parameter #6. Return on Capital Employed
To assess the management’s efficiency in respect of profitability and capital efficiency from the available capital, RoCE is one of the widely used financial ratios.
To compare the financial performance of the companies that belongs to the capital-intensive sectors where the companies have significant debt, RoCE is up to snuff. A double-digit RoCE indicates that the management of the company is quite efficiently generating profits by utilizing the capital employed.
When Earnings before Interest and Tax [EBIT] for a financial year are divided by capital employed, it’s the RoCE of the corporation. By calculating the RoCE you will find what cent of profit a company is making when the total capital employed is $1.
The higher the RoCE is, the higher the profitability of the corporation is. In general, you should invest in those companies the RoCE of which is either stable or surging not a company of which RoCE is fluctuating or plummeting year on year basis.
Parameter #7. Price to Sales Ratio
The price to sales ratio specifies what dollar amount the investors are willing to pay when a company generates a dollar in sales. To find out the Price to Sales ratio, divide the total market capitalization of the company by its sales/revenue generated in a financial year.
A low P/S ratio indicates that the stock is undervalued, and on the flip side a high P/S ratio may be overvalued. Simply put, the lower the P/S ratio is the best company is to invest in. In case the two companies have identical P/S ratio, compute the D/E ratio of both the firm. It’s a good idea to invest in a firm that is either debt-free or has marginal debt as compared to a firm with high debt.
Parameter #8. Price to Earnings Ratio
To assess whether the company’s current market price is in line with the company’s per-share earnings, price to earnings ratio is a helpful matric. To calculate the Price to Earnings ratio, divide the share price by its per-share earnings in a financial year.
As the price-to-earnings ratio varies from sector to sector, it’s a tuff call to pinpoint an exact figure. To find whether the stock is undervalued or overvalued take a close look at the peer companies and the average P/E of the companies in a specific industry/sector. As a good rule of thumb invest in those stocks of which the P/E ratio is anywhere between 7 and 10.
When a company’s P/E ratio stands at 12 then it’s as clear as the sky is blue that the current share price is 12 times multiple as compared to the firm’s annual earnings. In other words, when you invest in a company that has the P/E 12, then it will take 12 long years to earn back your initial invested capital in the scenario of annual profit is unaltered.
Parameter #9. Price to Book Ratio
Alike the Price to Earnings Ratio, the Price to Book Ratio is a widely used valuation metric that is quite popular to ascertain whether a security is undervalued or overvalued.
Once you divide the market value per share by book value per share of a firm, you will find the Price to Book Ratio.
The book value tracks down what a retail investor will get in the scenario of the company liquidates all of its assets in order to pay off the debt obligations in full.
The lower the P/B ratio is, the more lucrative the investment opportunity is. However, it’s hard to propose an ideal P/B ratio. No matter what is the share price of a stock, invest in those stocks where the P/B ratio stands at below 2.0.
Parameter #10. Current Ratio
To measure the company’s ability to pay off the short-term debt obligations that is due within a year by liquidating its current assets, the current ratio is the widely used liquidity ratio among the retail investors, stock analysts, or traders and counting.
When the current asset of the company is divided by the current liabilities, you will find the current ratio of the firm. The current assets include cash, inventories, or account receivables, etc. On the flip side, the current liabilities include accounts payable, wages of the workers, taxes payable in a financial year, and counting.
As a good rule of thumb, invest in a company that holds the current ratio higher than 1. However, when a company’s current ratio is 3 then it’s a clear sign that the management is not efficiently managing the assets to accelerate the profit margin.
7 Best Stocks to Buy Now Under $50
After analyzing the ample number of companies that are trading below $50 based on the above-mentioned parameters, here’s the list of good stocks under $50 that will yield steady and consistent returns, but when stay invested in the long run.
Carrier Global Corp [CARR]
Carrier Global Corp is an American multinational company that offers heating, air-conditioning, and refrigeration solutions. Currently, the company is operating across three segments including HVAC, Refrigeration, and Fire & Security.
Under the HVAC Segment, the company offers relevant products and services that meet the heating and cooling need of residential and commercial clients. The company’s heating and cooling solutions employ innovative technology that allows you to create the ideal indoor environment that is in line with your home and lifestyle and the patented HVAC technology cuts the electricity bills.
The Refrigeration segment is responsible for safe, reliable transport and preservation of pharmaceutical supplies, food and beverages, and other perishable items. Plus, the company offers fire and security products that detect fire, gas, and smoke. This feature saves lives and protects residential/commercial property. Aritech, Bryant, Carrier, CIAT, Day & Night, Edwards, GST, etc. are the world famous brands of Carrier Global Corp.
Let’s look at a glance at Carrier’s fundamentals.
- Market Capitalization – $42.59 Billion
- Revenue – $17.46 Billion
- Earnings Per Share – $2.57
- P/E Ratio – 19.1
- Forward P/E – 23.94
- Dividend Yield – 0.98%
- Beta – 0.39
Builders FirstSource [BLDR]
Builders FirstSource is the US’s largest supplier of building materials including wall panels, stairs, vinyl windows, roof & floor trusses, and counting. The company has set up offices across 550 locations in 40 states to deliver the best components, and services no matter whether you are building your own nest or want to renovate or repair your existing house.
Let’s look at a glance at Builders FirstSource’s fundamentals.
- Market Capitalization – $8.48 Billion
- Revenue – $8.56 Billion
- Earnings Per Share – $3.41
- P/E Ratio – 12.02
- Forward P/E – 9.80
- Beta – 2.41
Progyny Inc. [PGNY]
The company started its journey back in 2010 to ensure that any individual can have a child whenever he or she wants. This company is offering only fertility and family-building solutions to achieve an individual’s dream of parenthood by employing cutting-edge science and fertility specialists in the US.
Let’s look at a glance at Progyny’s fundamentals.
- Market Capitalization – $33.05 Billion
- Revenue – $56.53 Billion
- Earnings Per Share – $2.82
- P/E Ratio – 9.76
- Forward P/E – 8.03
- Dividend Yield – 2.71%
- Beta – 1.02
Freeport-McMoRan Inc. [FCX]
Freeport-McMoRan is a leading international mining company that operates in the mining of copper, gold, and molybdenum across North America, South America, and Indonesia.
Let’s look at a glance at FreePort-McMoRan’s fundamentals.
- Market Capitalization – $48.65 Billion
- Revenue – $13.87 Billion
- Earnings Per Share – $1.21
- P/E Ratio – 27.44
- Forward P/E – 10.99
- Dividend Yield – 0.87%
- Beta – 2.14
Corteva, Inc. [CTVA]
The company is engaged in the production of seed and crop protection products that protect against insects, weeds, and other pests for optimum crop production which will help the agricultural communities thrive. Although the company operates around the globe, the bitter truth is more than half of the revenues come from North America.
Let’s look at a glance at Corteva’s fundamentals.
- Market Capitalization – $30.81 Billion
- Revenue – $14.22 Billion
- Earnings Per Share – $1.34
- P/E Ratio – 31.2
- Forward P/E – 22.21
- Dividend Yield – 1.22%
- Beta – 0.85
HP Inc. [HPQ]
No matter whether you are an individual or an organization, HP has a portfolio of desktops, notebooks, personal computers, printers, mobile devices, scanning devices, and counting that amaze. Along with the above-mentioned items, to secure the environment from the ever-changing threat landscape, this company is engaged in developing technology to make the system more secure and resilient.
Let’s look at a glance at HP’s fundamentals.
- Market Capitalization – $4.74 Billion
- Revenue – $344.86 Million
- Earnings Per Share – $0.57
- P/E Ratio – 94.11
- Forward P/E – 131.36
- Beta – 1.79
Interpublic Group of Companies [IPG]
No matter what type of marketing solutions big corporates are hunting high and low for, the Interpublic Group will satisfy since it has a wide array of services including advertising, digital marketing, media, public relations, and counting. With different world views, cultures, each and every consumer is unique, and to attract customers, this company assists the corporates by preparing effective and relevant marketing strategies that convert.
Let’s look at a glance at Interpublic Group’s fundamentals.
- Market Capitalization – $12.36 Billion
- Revenue – $14.22 Billion
- Earnings Per Share – $1.10
- P/E Ratio – 28.58
- Forward P/E – 14.31
- Dividend Yield – 3.32%
- Beta – 1.04
Investing in penny stocks has an inherent risk of losing capital in full. But when you are investing in stocks that are trading below $50, these stocks won’t demand a retail investor to break the bank to own a share. Above all, you have got a well-known company at a hefty market price.
- Read also: Best Undervalued Stocks to Buy Right Now
- Read also: Best Stocks to Buy Right Now Under $20
Hope this article has helped you to find the best stocks to buy under $50. If I have missed any best stocks under $50 to buy now? Make a comment so that I can add it ASAP.
- Read also: 12 Best Stocks Under $50
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