For investors looking for value, are shares under $10 worth considering? Here we look at a few companies whose shares are trading below $10, and ask the question: Do they represent good value?
Micron Technology Inc (NASDAQ:MU): Shares are trading at $5.66, at the low end of their 52-week trading range of $5.20 to $11.95. At the current market price, the company is capitalized at $5.68 billion. Earnings per share for the last year were $0.63. It paid no dividend.
The share price has been hit hard since disappointing result in June. Margins on its key chip products have been eroded, though it sees a more positive future as it shifts its focus to DRAM markets for mobile devices and away from the pc market, which is seeing sharply declining sales. If this strategy works, then Micron could become a household name - like Intel (NASDAQ:INTC), one of its main competitors. However, at this time, with Intel’s size giving it competitive advantage and the shares trading on a similar price-to-earnings ratio of 9.05, the dividend yield of 4.30% makes Intel shares look more attractive in this low-interest-rate environment.
Sandridge Energy Inc (NYSE:SD): Shares are trading at $6.68 at the time of writing, as against their 52-week trading range of $3.87 to $13.34. At the current market price, the company is capitalized at $2.66 billion. Earnings per share for the last year were negative at -$0.07, and it paid no dividend.
Sandridge has great natural gas reserves and oil properties with huge potential. The problem is that the gas price is at historic lows, and looks set to stay low for the foreseeable future. This is likely to keep a lid on the share price.
A better buy would be Apache Corporation (NYSE:APA). Though the stock trades at $100.26, it has earnings per share of $9.95 leading to an undemanding price to earnings ratio of 10.07. Apache also pays a dividend, the shares currently yielding 0.60%. Apache’s gross margins are 83% as against Sandridge’s 62%. With less reliance on gas, its crude oil reserves and production will drive Apache’s growth in the years ahead.
Quepasa Corp (QPSA): Shares are trading at $4.42 at the time of writing, as against their 52-week trading range of $3.55 to $15.45. Earnings per share for the last year were negative at -$0.40, and it paid no dividend.
Quepasa recently released dreadful results. True, revenue grew by nearly 60% year on year to $1.8 million, as another 4.6 million Hispanics registered on the social networking site aimed specifically at them. However, they took a loss of $2 million on that revenue.
Earlier this year the company announced a deal that will combine it with myYearbook. Revenues between the two will look far better than those of Quepasa now, but the deal has a long way to go before it closes and in the meantime I think the shares are one to avoid. An investor wanting to put money into social networking would do better to look at Linkedin (NYSE:LNKD), though with a price-to-earnings ratio of 439.22, I find it hard to look at these without some amusement.
Health Management Associates (NYSE:HMA): Shares are trading at $7.31 at the time of writing, as against their 52-week trading range of $6.13 to $11.74. At the current market price, the company is capitalized at $1.86 billion. Earnings per share for the last fiscal year were $0.66, and it paid no dividend. The price to earnings ratio is 11.04.
People are living longer, but require care in their later years. This is where companies like Health Management Associates come in. The market values its competitors very similarly. Lifepoint Hospitals (NASDAQ:LPNT) shares trade on a price-to-earnings ratio of 10.68, Community Health Systems’ is 7.55, and HCA Holdings’ (NYSE:HCA) is 9.22. None pay a dividend. Operating margins at all four companies are broadly the same. It is an unexciting sector, but one that is growing. And at current share prices, Health Management Associates’ shares are the cheapest in absolute dollar terms, and represent a good buy in a tough investment climate.
Clearwire Corporation (CLWR): Shares are trading at $3.10 against their 52-week trading range of $1.32 to $8.82. At the current market price, the company is capitalized at $770.35 million. The company lost $16.34 per share last year.
Clearwire has been rapidly developing its wireless communications and broadband services in attempts to rival AT&T (NYSE:T), the giant in the industry. The best chance that shareholders have of realizing profit from owning its shares is to see the company swallowed by Sprint (NYSE:S) in its determination to catch its bigger rivals, AT&T and Verizon (NYSE:VZ).
This is a distinct possibility, especially as Sprint own nearly 50% of the shares of Clearwire. The downside here, of course, is that Sprint will feel no need to pay a large premium. So I believe that gains are limited for shareholders of Clearwire, and a better buy would be the giant AT&T, whose shares trade at a low price-to earnings-multiple of 8.44, and yield 6%. At a share price of $28.98, this is a far better value.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.