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The new financial wisdom should be “When there is blood in the European banking system go for the value stocks priced under $7.” There is no denying of the fact that European contagion is reflecting badly on U.S, equities too, but there is a silver lining here as the plunge in stock market has created a few very interesting buying opportunities. For those intelligent investors, I present an analysis of seven stocks that are trading below $7 and have potential to give massive returns.

Sprint Nextel Corporation (NYSE:S) is a wireless and wire line communications service provider serving the needs of 52 million customers in the U.S., making it the third largest wireless carrier in the country. Its stock was last traded on the floor at $3.4. However do not let the low stock price deceive you. Revenues are fat for Sprint at $33.08 billion and cash reserves are plump at $4.27 billion. Growth figures aren’t too appealing but the quick ratio and current ratio are 1.1 and 0.9, respectively, presenting stable liquidity. However, there is some big news in store for the company. The wireless 4G pioneer in the U.S. has teamed up with the top mobile phone provider, Samsung, to bring out an extremely affordable Samsung Conquer 4G. Combining an ambitious sales strategy with the latest technologies, Sprint is set to steal customers from bigger companies such as T-mobile. Sprint Nextel has just entered the sprint!

Nokia Corporation (NYSE:NOK) is the best at what it claims to be: connecting people. And there is one more good thing about Nokia; its annual dividend yield. Touching the 9% mark now, the yield is the best any communication equipment company is offering right now. The price earnings ratio stands at 11.40, lower than its peers such as LM Ericsson (NASDAQ:ERIC). And if it was not enough to entice you, the price earnings to growth ratio stands at only 0.6 implying the stock is much undervalued especially when compared against its competitors like Qualcom (NASDAQ:QCOM). Liquidity is well looked after at Nokia, with a current ratio and quick ratio measuring at 1.4 and 1.3, respectively. None of the investment returns ratios are negative either and revenues are consistent, at $60.69 Billion. Nokia is still the top smart phone producer even after the competitive threats from Blackberry (RIMM) and Apple (NASDAQ:AAPL), and the best are meant to reach the sky, not to be traded at just $5.9.

Next we have Alcatel (ALU), another communication equipment company. It is one of the bigger companies in the industry with a market capitalization of $8.39 billion. The price earnings ratio is 16, indicating a fairly priced stock in the industry. Sales are decent at $23.62 billion, and net cash flows are handsome at $1.4 billion. Its income rose by 50% in the last 12 months. Alcatel-Lucent lately announced that it has been selected by SaskTel, a communications provider, as the primary infrastructure provider to help implement SaskTel's recently announced Fiber to the Premises Program. Clearly, the company has some serious business up its sleeves, and with the financial position looking satisfactory, there seems no reason the investors are not going to take this stock seriously.

Boston Scientific Corporation (NYSE:BSX) is close to our health and why shouldn’t it be? The $9.81 billion market capital company operates in the medical instruments and supplies industry; its range of products is extensive and we need not know each detail of them, all we need to know is that this stock contains a lot more potential than its present state of affairs. It has a price earnings ratio of 16.8, a bit higher than that of 3M (NYSE:MMM) and Baxter (NYSE:BAX). It might seem small compared to Johnson and Johnson (NYSE:JNJ), but its gross margins are roughly the same as JNJ’s. The price earnings to growth ratio is also lower than Johnson and Johnson: 1.45 against J&J’s 2.29. Earnings per share growth have been phenomenal at 66.70%, falling just two places behind the industry leader. Revenues are growing and the profits are soaring. Add to it the insider buying by the company directors, and we are left with little doubt that the company is soon going to play its best cards.

Lloyd’s Banking Group (NYSE:LYG) has been facing the brunt of the European economic meltdown with rest of the European bank stocks. The British bank’s stock prices plunged as the news from across the Atlantic presented a scenario all gloomy and dark. But I believe that Lloyd’s might be the light at the end of the tunnel. A look at company’s financials is reassuring. Revenue growth of 28% in the last quarter gives a hint that the company is not going to lose it all so easily. With a long term growth rate (5-years) of 69.70%, it beats rest of the ten foreign banks being traded at the New York stock exchange. This bank is still trading at a 50% discount to its book value and investors won’t wait much longer before they start piling into its shares. And lastly, a price earnings to growth ratio of only 0.15 points to the likelihood that the company has yet to see its best days.

Sirius XM Radio (NASDAQ:SIRI) provides satellite radio services in the United States and Canada. It broadcasts a programming lineup of approximately 135 channels ranging over a host of categories. The numbers are simple yet attractive for Sirius. A sales growth of 13.90% and an income growth of 108% suggest that the situation is contrary to the current trading price of $1.8. It is amongst the industry leaders in quite a few regards, be it the earnings per share quarterly growth of 102% or a return on equity of 70.40%. The price earnings to growth ratio of 0.89 is an adequate proof that the company’s potential is yet not being seen by the investors. A gross margin of 62% and a debt/asset ratio of 42% doesn’t make it a bankruptcy case, as the current stock price would suggest.

Chimera Investment Corporation (NYSE:CIM) is the last on our list, yet it should not be taken as the least important. A real estate investment trust (REIT) the company manages investments in an array of real state mortgages, securities and other assets classes. The company’s gross margin of 100% shows that the company is almost minting money. It has a gross dividend yield of around 17%, and who would want to miss this hefty yield especially in an environment where 10 year treasury is yielding less than 3%. A price/earnings ratio of 5.37 is not too bad as compared to Annaly Capital Management’s (NYSE:NLY) at 6.65 and MFA Financial’s (NYSE:MFA) at 7.84. Similarly, price/earnings to growth ratio of 0.37 speaks for itself. The company’s potential is being undervalued and it is time for the smart investors to make smart choices.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 7 Stocks Under $7 With Upside Potential