Making a decision to buy a stock is very important for any investor. When an investor makes a buy decision, she has to consider many aspects of the stock. Good financial health of a company does not necessarily mean a good investment opportunity is at hand. We want 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:
Ford Motor Co. (NYSE:F):
The current share price of the company is $10.40, which is $9 less than its 52-week high. The stock price of the company for the last 52 weeks ranges from $9.81 to $18.97. At present, the stock price of the company is near about one-half the stock price of its competitor General Motors (NYSE:GM). The stock price was at its peak last January, and then started to fall abnormally and reached $10 last week. The basic chart is showing reverse pattern and the stock price has started to recover.
The gross margin of F is 15.23% whereas the industry average is 20.50% and GM’s margin is 12.49%. Return on equity (ROE) of the company is 755.33% and it is very impressive whereas ROE of GM is 27.82%. The operating margin of the company is 6.61%, close to the industry average and above GM's. Net income is positive and the price/earnings ratio is higher than that of competitors but lower than industry average. Recently the company has started hybrid vehicle production in collaboration with Toyota. It surely will have a positive impact on the stock price.
Ford Motor is a renowned company, and the company’s profitability is good. My analysis is that F may not be a good buy for the short term, but it will be a good decision in the long run.
Pfizer, Inc. (NYSE:PFE):
The latest stock price of the company is $18.21. The price has increased by 1.39% in comparison with the last day’s closing price. The stock price of the company ranges from $15.77 to $21.45 for the last 52 weeks, and the current price is about 15% below its highest price range. The price of the stock is 75% less than the price of its competitor Merck & Company (NYSE:MRK). The basic chart shows strong reverse pattern, and the stock price has started to rise, though trading volume is still not satisfactory.
Financial indicators for the company are moderately good. Quarterly revenue growth is negative whereas industry growth is 10.50% positive. Gross margin for the company is 75.85% where MRK’s growth is 65.22% and industry average is 51.47%. The operating margin of the company is 25.17%, much higher than that of its competitors and also higher than the industry average. The annual earnings per share (NYSEARCA:EPS) of the company is $1.07. Price-earnings ratio of the company is satisfactory, but the PEG ratio indicates that the stock is overpriced. Return on equity of the company is 9.83% whereas MRK’s ROE is only 5.19%.
I think the stock has very good prospects, and buying the stock for long term would be a good decision.
Applied Materials, Inc. (NASDAQ:AMAT):
The latest market price of the stock is $11.06, near the bottom line of its 52-week price range. The stock price was at its peak last March, but since then it continued to decrease, eventually dropped to below $11, and is still showing a downward trend.
The current stock price of KLA-Tencor Corporation (NASDAQ:KLAC), a direct competitor of the company, is $35.47.
Quarterly revenue growth of AMAT is less than that of its competitors and higher than the industry average. Gross margin of the company represents the industry but is lower than that of KLAC. Operating profit is near about three times the industry average, but still less than its competitors. Net income and earnings per share are positive, and PEG is showing high growth opportunity in the price. Return on equity (ROE) is 20.46%, which is quite good; KLAC's ROE is 31.11%.
The overall financial health of the company is moderately good. Recent news is also positive. As the basic chart is showing support level at the current price, buying this stock right now would not be a good decision. The right time to buy the stock will be when the chart reverses pattern.
Cisco Systems, Inc. (NASDAQ:CSCO):
The last trade price of the stock is $15.32, which is about 37% below its highest price over 52 weeks. Yearly price range is $13.30 to $24.60. In the last trading day, the stock price increased by 1.59% and the basic chart is showing reverse pattern from its downward trend.
The price of competitor Juniper Networks, Inc. (NYSE:JNPR) is $20.90. Recent trade volume of the stock is decreasing continuously. Quarterly revenue growth of the company is much less than that of JNPR, and also below the industry average. Gross margins of the company are moderate, but operating margins are very good compared to its competitors and the industry average, which indicates operating efficiency of the company. The P/E ratio is satisfactory and PEG ratio is showing high growth opportunity. Return on equity of the company is 14.18%, whereas JNPR’s ROE is 8.67%.
The overall financial condition of the company is quite healthy. As the basic chart shows reverse pattern, I think it is the right time to buy this stock.
H&R Block, Inc. (NYSE:HRB):
The recent price of the company is $13.96, which is around one-third of Intuit Inc.'s (NASDAQ:INTU) share price. The 52-week price range of the company is $10.13 to $18. In the last trading day, the stock price has increased by 3.03%. The basic chart shows strong reverse pattern, and it will grow more within a short time.
In terms of financial indicators, the company is in good shape, though all the financial indicators are poorer than its competitors. Gross margin and operating margin are healthy. Earnings per share are 1.31, P/E ratio is quite satisfactory and PEG ratio is showing high growth opportunity. Return on equity of the company is 29.02%; ROE is 23.32% for INTU.
The company is a very good prospect, according to its financial indicators. As the basic chart shows a strong reverse pattern from its support level, I think it is the right time to buy these shares.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.