When an investor makes a decision to buy, she has to consider many aspects of the stock. Good financial health of the stock does not mean it is a good investment opportunity because value is what matters most. The investor wants to buy a good company’s stock at the lowest possible price at the right time. Here, I have discussed five ’buy’ rated stocks trading under $20 based on different parameters. My fundamental analysis indicates that some of these names might be exactly what investors are looking for, while, on the contrary, an analyst buy rating is not what it is cracked up to be for other names:
The latest share price of TD Ameritrade Holding Corporation (NYSE:AMTD) is $14.65, which is 36% lower than the highest price in the past 52 weeks. The stock price was in a downward trend for last three months and, in the last month, fell drastically from $20 to the $14 level. It has, however, started to recover and the trend shows that it will grow in future.
The price-to-earnings ratio (P/E) of the company approximates the industry average whereas the P/E ratios of The Charles Schwab Corporation (SCHW )and E*TRADE Financial Corporation (ETFC) are higher than that of the company. The company is earning $1.02 per share (EPS). Return on equity (ROE) of the company is 14.69%, which is better than SCHW’s ROE of 11.48% and ETFC’s ROE of 1.71%. This is quite a healthy return in comparison with its competitors. The gross margin of the company is 96.45% whereas the industry average is 83.21%. The operating margin of the company is 36.44%, which is nearly three times higher than that of industry average. The PEG ratio of the company is below 1.
AMTD looks to be in good shape in terms of earnings per share, the price earnings ratio and the PEG ratio. I think the company will grow more in future and buying the stock will be a very good decision.
Another stocks I discovered was trading at a compelling value was UTI Worldwide (NASDAQ:UTIW). The current share price of the company is $12.78, which is $11 less than its highest price in 52 weeks.
The gross margin of UTIW is close to the industry average and higher than Expeditors International of Washington (NASDAQ:EXPD), a competitor of the company. The operating margin of the company is 2.72%, below the industry average. The net income of the company is positive, representing that of the industry. The price earnings ratio (P/E) is higher than industry average and lower in comparison with its competitors. Quarterly revenue growth is impressive and much higher than the industry average. Return on equity of the company is 8.28%.
UTi is a growing company. Different financial indicators, including operations, are showing some areas of improvement. I think investing in this stock for a long time will be a very good decision.
One chip giant also offers a compelling value. The last trading price of Intel Corporation’s (NASDAQ:INTC) stock is around $19. The 52-week price range of the stock is $17.60 to $23.96 and the current price is near the bottom level. The stock price peaked last May before starting to fall. Now INTC is in a trend of price recovery and the basic chart is showing its price in an upward trend.
All financial indicators of the company are showing the company’s strong health in comparison with its competitor, AMD. The gross and operating margins of Intel are 63% and 33.55%, respectively, which are much higher than those of Advanced Micro Devices and the industry average. The price-to-earnings ratio and PEG ratio of the company are both below industry average and similar to Advanced Micro Devices. The return on equity of the company is 25.91% whereas that of Advanced Micro Devices is 69.20%.
Intel is doing very well. For the last few years, the company’s growth has been remarkably good. I think it will be a good decision to buy this stock.
Rambus Inc. (NASDAQ:RMBS) is another name that makes the cut. The latest share price of Rambus is $11.18 and the price is near the bottom level of the yearly range. The stock price increased by 3.14% from the last day’s trading closing price and trade volume has decreased significantly. The stock price is 16% lower than the price of NVIDIA Corporation (NASDAQ:NVDA), a competitor of the company. The 52-week price range is from $9.78 to $22.80.
The gross margin of the company is 95.03% and the operating margin is 19.63%, which is much higher than the industry average, but its net income is negative. NVDA’s gross margin and operating margin ratios are 49.29% and 15.32% respectively, which are lower than those of the company. The quarterly revenue growth of the company is quite impressive at 70.40% whereas it is only 12.80% for the industry.
The performance of Rambus is not good. It would not be a wise decision to buy this stock for a short time; however in the long run, the company will do well as it is in a growth stage.
Finally, Human Genome Sciences Inc. (HGSI) makes the list. The current stock price of HGSI is around $12.50, which is the lowest level of the 52-week range. In the last trading day, the share price increased by 2.77% with the basic chart showing a drastic fall in the last week. The price of the stock peaked last September, then started to fall, but it started to recover from last January.
The financial health of the company is poor as all the indicators are showing negative numbers. The quarterly revenue growth of the company is -35.90% whereas the industry average is 19.10%. The gross margin of the company is -123.87% whereas Biogen Idec (NASDAQ:BIIB)’s margin is 91.80% and the industry’s average is 64.03%. The operating margin of the company is -236.66% whereas the industry’s average is -84.82% and BIIB’s operating margin is 34.87%.
The overall financial condition of the company is very poor. The basic chart shows the price of the stock will fall more so buying this stock would not be a good decision.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.