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Last week, I posted two articles related to low-priced stocks. One of them focused on stocks that I find worthy of a buy and the other focused on stocks I think should be avoided. In this article, I will be reviewing three additional low-priced stocks that I think should be avoided. In determining why I think these stocks should not be purchased, I will be looking at each company's financial performance, current valuation, recent trading activity, earnings, and future outlook.

Stock No. 1

Acorn Energy, Inc. (ACFN) specializes in the acquisition and acceleration of ventures that seek to provide solutions toward improving the economic and environmental efficiency of energy infrastructures. ACFN is a global company with controlling positions in several companies offering such energy solutions. The company was founded in 1986 and is headquartered in Delaware.

Financial Performance

Profit Margin (Trailing Twelve Months)-83.51%
Return on Assets (Trailing Twelve Months)-19.09%
Return on Equity (Trailing Twelve Months)-32.81%
Revenue (Trailing Twelve Months)20.95M
Revenue Per Share (Trailing Twelve Months)1.17
Quarterly Revenue Growth (Year Over Year)36.60%
Market Cap145.81M

Acorn Energy continues to be unable to create a positive net income. In 2009, it posted a negative net income for the year and things haven't changed much since. 2010, 2011, and 2012 all had negative net incomes and this year doesn't look to be different. ACFN has seen relatively steady increases in revenue over the past several years, but the company has not been able to translate this into a rise in profit.

Current Valuation and Recent Trading Activity

ACFN has a current price to book value of 3.2x, with a negative earnings per share of $0.96. ACFN is currently trading at $8.14, $2.86 shy of its 52-week high and $1.98 higher than its 52-week low. It is trading above its 200-day moving average of $7.78, but below its 50-day moving average of $8.71.

Earnings

Earnings for Acorn Energy have been pretty terrible for quite some time. The company has missed estimates for the past seven quarters. When ACFN announces earnings later this week, I wouldn't be surprised if it makes it eight quarters in a row. ACFN has reported positive earnings only once (back in 2011) since 2007.

Company Outlook

Acorn Energy is doing some things right. The company is well positioned to take advantage of a changing market and see increased revenues as a result. However, the company has not yet displayed any evidence that it can translate higher revenues into higher profits and earnings.

I believe that Acorn Energy has a solid management team in place, but has continued to underperform. It is a stock worth keeping an eye on in the coming years, but unless there is some kind of positive news in the company's earnings report later this week, I have to recommend avoiding this stock for now.

Stock No. 2

Adecoagro S.A. (AGRO) operates in South America as an agricultural company with activities in Argentina, Brazil, and Uruguay. The company engages in the production of crops and other agricultural products, including land transformation activities. The company was founded in 2002 and is based in Luxembourg.

Financial Performance

Profit Margin (Trailing Twelve Months)1.77%
Return on Assets (Trailing Twelve Months)1.46%
Return on Equity (Trailing Twelve Months)0.98%
Revenue (Trailing Twelve Months)604.09M
Revenue per Share (Trailing Twelve Months)5.03
Quarterly Revenue Growth (Year over Year)-0.60%
Market Cap806.35M

AGRO has very small profit and operating margins. With poor revenue growth, that is a poor combination.

Current Valuation and Recent Trading Activity

AGRO has a current price to earnings value of 37.2x and a price to book value of 0.8x with earnings per share of $0.18. AGRO is currently trading at $6.70, $4.20 shy of its 52-week high and just $0.69 higher than its 52-week low. AGRO has seen a fairly steady decline in stock price since its 52-week high back in August of last year.

Earnings

AGRO has missed earnings estimates in six of the last seven quarters, reporting earnings of $0.00 per share in three of those quarters. The past three quarters have been especially bad, missing earnings by $0.08, $0.10, and $0.06 per share. The one-year earnings growth rate for AGRO sits at negative 225%.

Company Outlook

AGRO doesn't appear to have any catalysts in place to provide substantial and sustainable growth. With a recent history of poor earnings reports and an estimated negative earnings report forthcoming, AGRO doesn't have a large enough upside to warrant the risk associated with owning an international agricultural stock. Because of this, I recommend avoiding this stock.

Stock No. 3

Roundy's, Inc. (RNDY) runs a chain of supermarkets throughout several areas of the Midwest. Pick 'n Save, Rainbow, Copps, Metro Market, and Mariano’s Fresh Market are the stores that RNDY operates. The company was founded in 1872 and is headquartered in Milwaukee, Wis.

Financial Performance

Profit Margin (Trailing Twelve Months)-1.60%
Return on Assets (Trailing Twelve Months)5.37%
Return on Equity (Trailing Twelve Months)-25.69%
Revenue (Trailing Twelve Months)3.94B
Revenue per Share (Trailing Twelve Months)87.76
Quarterly Revenue Growth (Year over Year)4.80%

Roundy's currently struggles with low margins and high debt. Over the past 12 months, RNDY has a negative net income.

Current Valuation and Recent Trading Activity

RNDY has a current price to earnings value of 9.3x and a price to book value of 2.1x, with earnings per share of $1.00. RNDY is currently trading at $9.29, $1.11 shy of its 52-week high and $5.60 higher than its 52-week low. It is trading above both its 200-day moving average of $7.12 and its 50-day moving average of $8.79.

Earnings

Earnings haven't been great for RNDY recently. The company has missed three of its last four earnings estimates. In the past two quarters, RNDY has reported earnings per share of $0.19. RNDY has a one-year earnings growth rate of negative 20.63%. This is in comparison to a positive 23.59% earnings growth rate for the retail industry in general.

Company Outlook

On Thursday, Roundy's will report Q2 results. I believe there is a good chance that RNDY will once again miss on its earnings estimate of $0.33 per share. Last year, RNDY cut its quarterly dividend nearly in half from $0.23 per share to $0.12 per share. Even with the reduction RNDY has a high payout ratio, and I wouldn't be surprised to see another cut to its dividend later in the year or early next year.

Unless management can find a way to increase sales and earnings, Roundy's will continue to underperform. Same-store sales are crucial to this company and while other grocers like Kroger have been able to increase same-store sales, this remains a huge problem for Roundy's. Because of this, I have to consider RNDY a stock to avoid.

Conclusion

All three stocks reviewed above have problems. Poor earnings, lack of growth, bad margins, and heavy debt loads are just a few of the issues facing these companies. Two of the three companies pay dividends, but I feel that only one of them has a relatively safe dividend. That company is Acorn Energy. But with such as low yield, I don't feel this a stock you should own strictly for the dividend.

Acorn Energy is also the one company out of the three that I believe has a good chance of turning things around in the near future. However, because of ACFN's inability to maintain positive earnings up to this point, I have to recommend that you avoid this stock, as well as the other two stocks reviewed.

Source: Cheap Stocks To Avoid: Round 2