5 Stocks Under $7 With Potential

by: Investment Underground

Chimera Investment (NYSE:CIM) is currently yielding above 16%. The company grew profits by 64.47% to $533 million in FY 2010 through October, after posting a return to positive territory in FY 2009 by drawing in $324 million in profits from - $120 million in FY 2008. For Q1 2011, the company made $156.22 million in profits. In comparison, Q1 2010 resulted in $95.46 million in profits.

The next dividend announcement should come within the next couple of weeks. In 2010, the April 30 dividend was announced on March 18.

Trading in the low 4s, it beat earnings estimates for 6 of the last 9 quarters. This play is not for capital appreciation, but it is for the dividend payments. The company invests in US government and private residential mortgage-backed securities representing interests in obligations backed by pools of mortgage loans.

For other high-yielding REITs, see "Income Investors: Consider these 13 High-Yielding, Healthy REITs."

Sappi (SPP) grew revenues by 22.41% to $6.57 billion in FY 2010 through September, after declining by 8.43% in FY 2009, but rising by 10.54% in FY 2008 and +7.35% in FY 2007. Net income was positive with $66 million in FY 2010, but negative in FY 2009 with - $177 million. EBT margins are also thin. However, shares trade with a price to sales multiple of 0.4. In 2006 and 2007, those figures were 0.8 and 0.6, respectively.

Revenues are up 15.6% in Q1 2011 from Q1 2010. EPS came in at $0.07, after producing - $0.10 in Q1 2010. Analysts expect EPS in FY 2011 to come in between $0.17 and $0.49. In FY 2010, EPS was $0.10.

The company’s D/E is already manageable at 1.05. Yet, the company aims to reduce finance and debt costs with a tender offer to repurchase up to $150 million of senior notes, which mature in June 2012.

Globally Sappi works closely with customers, both direct and indirect, in over 100 countries to provide them with relevant and sustainable paper, paper-pulp and chemical cellulose products and related services and innovations. Its range of paper-products includes: coated fine papers used by printers, publishers and corporate end-users in the production of books, brochures, magazines, catalogues, direct mail and many other print applications; casting release papers used by suppliers to the fashion, textiles, automobile and household industries; and in the Southern African region newsprint, uncoated graphic and business papers, premium quality packaging papers, paper grade pulp and chemical cellulose. Its chemical cellulose products are used worldwide by converters to create viscose fibre, acetate tow, pharmaceutical products as well as a wide range of consumer products.

Advanced Semiconductor Engineering (NYSE:ASX) grew revenues by 120% to 188.7 billion TWD ($6.37 billion) in 2010, after falling 6.8% in 2009. EPS shot up by 171.9% to $0.484. Some optimism surrounds the company, as 2 analysts expect the company to grow EPS to $0.57 or to $0.69.

EBT margins were also healthy in 2010 with 12.1% and in 2009 with 9.7%. Shares also trade with a P/S multiple of 1.2. From 2005 to 2007, those multiples were 1.5, 1.7, and 1.7, respectively. Moreover, the company has a healthy debt to equity ratio of 0.48, and current ratio of 1.44.

FY 2011 is off to a good start. In February 2011, net revenues were up by 6.8% compared to February 2010. In January 2011, net revenues jumped by 78.9% compared to January 2010.

Because the company is the world’s largest semiconductor packaging and test company, we expect significant capital appreciation once the global economic environment stabilizes and is on a strong growth path. To get a feel on the tech sector’s trajectory, read: "What You Need to Know about These 11 Tech Bellwethers in 2011."

Popular (NASDAQ:BPOP) is a bank holding company that operates in Puerto Rico and the U.S. as Banco Popular. It also delivers financial services across 96 branches in New York, New Jersey, Illinois, Florida and California. The bank’s deposits are insured by the FDIC, and it has $38 billion in assets.

The company drew in $2.58 billion in revenues in 2010, which was an increase of 29.3%, after declining by 5.28%. Profits were also positive with $137 million, after posting - $574 million in 2009. The EBT margin was a healthy 9.51%.

EPS came in at - $0.06 in 2010, but it was $0.24 in 2009. Analysts predict 2011 to bring in good EPS results with a range from $0.14 to $0.30. P/S is currently 1.0, but during good times it was between 2 and 3.

RF Micro Devices (RFMD) made $978 million in revenues in FY 2010 through March, which was an increase of 10.37%. EBT margin was 8.67% in FY 2010. Through the 9 months ending in December 2010, revenues were up 16.8% to $838 million. For the same time period, EPS was $0.36 versus $0.16 9M09. EBT margin was 13.6%. The company is on the up and up.

The next earnings results are released on April 25. RFMD has a market cap of $1.6 billion.

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