Most investors miss the greatest value opportunities.
In this article I am going to analyze these five undervalued stocks that are trading under $10:
Southwest Airlines Co. (NYSE:LUV)
The shares of Southwest Airlines (LUV) are trading at a price of about $8 per share. Using the trailing twelve months data, this company has a market cap of $6.44 billion with the operating margin of 7.27% and the profit margin of 3.71%. It has a return on equity of 7.88%.
The earnings per share is $0.66. The earnings ratio is at 12 times. The net income of the company has generated $502.00 million in the past 12 months and it has a quarterly revenue growth rate of 30.60% from the year on year data which indicates a good growing rate for the company. It has a small dividend yield of 0.02 (0.20%).
Currently, JetBlue Airways has the earnings per share of $0.31 with the earnings ratio of 13.21 times. These could mean that it is more expensive than the Southwest Airlines because of the earnings ratios differences. Unfortunately, it has lower earnings per share as well. However, it has got a fairly high operating margin of 8.26%.
Alternately, United Continental Holdings (UAL) is performing the best (in terms of earnings per share) out of these two stocks with $1.20 in trailing twelve months' earnings. Although it has a higher earnings ratio and a lower operating margin.
As a result, Southwest Airlines (LUV) might be trading at a lower price compared to these two competitors. It has a high operating margin combined with a good earnings ratio and average earnings per share it generates. This stock might sell at a higher price in the future.
Gerdau S.A. (NYSE:GGB)
Gerdau is a Brazilian steel company which is also trading under $10 per share. It has a market cap of $14.35 billion with the operating margin of 7.78%. Its net income is fairly high according to the company`s balance sheets, its net income is $1.10 billion in one year period trailing from the twelve months data. Its dividend yield is 0.15 (1.90%) which is also at a good rate. It has a return on equity of 8.13% and a quarterly revenue growth of 8.60%.
There is one strong competitor, Companhia Siderurgica National (NYSE:SID) trading with the market cap of $13.50 billion and that has lower capital than the Gerdau S.A. (GGB). Even though it has lower capital, its performance is above the averages. This company is doing better with the overall past 12 months data. It has generated 11.60% in quarterly revenue growth, operating margin of 35.75%, $1.26 earnings per share, 7.35 times earnings ratio and it has generated $1.84 billion in net income.
Even in a smaller sector like steel and iron: GGB Industry is performing far better than SID. This company has capital of $1.16 billion. The overall performance of this industry is 15.40% in the revenue growth, 8.26% operating margin, $1.04 earnings per share and 7.65 times the earnings ratio.
It might be a good idea to sell this stock now if you are still holding it as two of these competitors beat its overall performances with ease. Investors might look into buying the Companhia Siderurgica National (SID) now as these shows that it is a new boom happening there and it is growing at a fast rate.
SIRIUS XM Radio Inc. (NASDAQ:SIRI)
SIRIUS XM Radio is a satellite radio service provider in the United States and Canada. It has a market cap of $6.33 billion. It`s now trading for less than $2 per share with the earnings per share of $0.04. Unfortunately, its earnings ratio is very high trading at 41 times. It has the operating margin of 21% and the return on equity of 70.40%. This shows that the company is performing well while managing properly. However, its statements showed that the company is still in large debts with the total amount of $3.02 billion. This is almost half of the market capital itself. The revenue growth of this company is only 6.4%.
Unlike Cumulus Media (NASDAQ:CMLS) with a capital market of $143 million, this company seems to be more in trouble. Its price earnings ratio is 3.4 times which is pretty much discounted compared to the last one. However, discounted doesn`t always mean it is a good buy. Even though this company has the operating margin of 28.9%, its return on equity is unavailable to the public. Why is that so?
Let’s analyze and see its cash flows. It seems that the company is in a very large debt of $610.00 million in total. This is about 5 times more than the market cap itself. Now let’s see how they are performing with its revenue. According to its statement data, it had the total revenue of $264.27 million in the last year. This is even less than the debts it owns.
If SIRIUS XM Radio (SIRI) will overcome its debts while generating consistent profits, it is much more likely that the price of the shares will go up at an incredible rate. On the other hand, Cumulus Media (CMLS) is in trouble and it may not do well if it won`t overcome its debts. This signals a strong sell for the company.
Nokia Corporation (NYSE:NOK)
Nokia (NOK) is a world leading mobile manufacturer. It has a market capital of $21.85 billion with the operating margin of 3.55%. It has generated the net income of $1.80 billion last year. It has earnings per share of $0.48. The earnings ratio is 12.37 times. Its return on equity is 5.48% and it has the total debt of $7.89 billion. The revenue growth of the company has decreased by -7.30% last year. The company seems to be at a low now.
Let`s analyze a similar company like ML Ericsson Telephone (NASDAQ:ERIC). This company has a total market capital of $33.71 billion. It has the operating margin of 12.75%, earnings per share of $0.75 and the earnings ratio of 14.12 times. Its return on equity at 10.75% which is also higher than the Nokia Corporation.
Its safe and good to buy the shares from these companies. It seems Nokia Corporation (NOK) has a cheaper share price comparing to the ML Ericsson Telephone Co., but the ML Ericsson Telephone seems to perform better than the Nokia. The Nokia prices could go up anytime soon.
Ford Motor Co. (NYSE:F)
Ford Motor (F) is a vehicles manufacturer. It has a market capital of $39.06 billion. It has the earnings per share of $1.75 trailing from the twelve months data. Its earnings ratio is 5.93 times. Amazingly, it manages so effectively with the return on equity of up to 755.33% last year. The operating margin is also acceptable at 6.61%.
However, the fact is that this company is still operating under the debts. It seems that the company has leveraged itself by up to 3 times. The total debt it owns is $98.55 billion. With that said, the company is now on the discounted price affected by the fear of its debts amount. It has generated $130.96 billion in revenue and has increased its revenue growth by 1.30%, but will it be able to sustain these results in the long run?
General Motors (NYSE:GM) which is one of its competitors has a total market capital of $34.83 billion. This company has a higher revenue growth of 18.70%, but a lower operating margin of 4.24%. It has generated $4.75 in earnings per share which is higher than Ford Motor (F). It has earnings ratio of 4.70 times which is also cheaper. Nonetheless, it has a lower return on the equity of 27.82%. The ratio of the debt/equity of this company is also high at 28.68 times.
Plenty of investors still think Ford Motor (F) might not survive this ever-changing economic crisis by over leveraging its capital by three times. So, it might be a good idea to buy while everyone is pessimistic.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.