4 Stocks Under $10 With Great 5 Year EPS Growth

Includes: AMOT, DS, DX, HIHO
by: Leonid Kanopka

I have compiled the data for the following 4 stocks that have a very good 5-yr EPS growth rate, and sell well under $10, making them budget buys. The 5 year growth rate shows consistent improvement for a long-term 5 year period, and potential to push the price of these stocks much higher, given they are highly undervalued. These stocks also pay dividends, making them a great choice for any portfolio:

Allied Motion Technologies Inc. (NASDAQ:AMOT) designs, manufactures, and sells motors, electronic motion controls, and gearing / optical encoder products. It offers a range of products for semiconductor manufacturing, industrial automation, medical equipment, military, and aerospace markets. The current price is very cheap at $4.89, and has a current dividend yield of 1.6%. AMOT has earnings growth of 41.9% yoy, and a 5-yr EPS growth rate of 27.12%. Shares ended Monday 10/10/11 with a 20.6% gain after the company reported a profit of $348M or 5 cents a share, for the three months ended March 31, up from year-ago equivalent earnings of $168M or 2 cents a share.

Revenue at this Denver-based maker of motion control products rose 15% to $21.2 million from $18.5 million in the same period a year earlier. Of the 47 firms within the Electronic Equipment Subsector that have reported debt-to-capital, AMOT is among the 38 firms whose balance sheet is free of long-term debt, making it a great buy at the current discounted price. On 10/13/11, AMOT closed at $4.99, 46.1% below its 52-week high and 9.9% above its 52-week low. Shares are trading 3.3% below their 50-day moving average of $5.16, and 22.0% below their 200-day moving average of $6.40, making it a great buy opportunity. I also like the fact that AMOT has a lot of recent insider activity signaling executive confidence in the company. Below is a chart of recent insider activity:

Transaction Date Name Position Type Shares Range Market Value Total Holdings
8/8/2011 HEATH, S. R. JR. Director Buy 476 $5.25 2.5K 19,914
5/17/2011 HEATH, S. R. JR. Director Buy 370 $6.75 2.5K 19,438
2/23/2011 HEATH, S. R. JR. Director Buy 338 $7.38 2.5K 19,068
3/25/2011 LABER, GERALD J. Director Buy 3,000 $6.75 20.3K 7,000
11/16/2010 LABER, GERALD J. Director Buy 2,000 $5.35 - $5.37 10.7K 4,000
11/15/2010 LABER, GERALD J. Director Buy 2,000 $5.41 - $5.48 10.8K 2,000

Dynex Capital Inc. (NYSE:DX) together with its subsidiaries, operates as a mortgage real estate investment trust (REIT). Current market price is $8.00 with a 1 year price target of $10.32 (29% upside potential). DX has a current dividend yield of 13.50%, which only adds value and sparks interest to income investors. Another reason DX caught my attention is the recent insider activity, which has been nothing but buying from the start of the year. DX's current quarter consensus estimate has remained relatively unchanged over the past 90 days at 0.35, when peers within its subsector have moved an average or -2% during the same time period. This shows a bullish outlook from analysts for Dynex, compared to a grim view of the subsector. The average 5-yr EPS growth for DX has been 32.24%, which signals strong growth in a down housing market. Also DX's current Forward PEG of 0.8 represents a 56% discount to its Mortgage REITs Subsector average, and a 27% discount base on trailing P/E. Overall DX looks undervalued, making it a good investment choice, and with the current dividend yield, a fantastic choice!

Highway Holdings Ltd. (NASDAQ:HIHO) Through its subsidiaries manufactures and supplies metal, plastic, electric, and electronic components, as well as sub-assembles and finished products for original equipment manufacturers and contract manufacturers. The current price is exceptionally low at $2.60 with a book value of $3.44 (32.31% upside potential). HIHO is extremely cheap, especially in comparison to its 52-week high of $4.49. Net income for the first half of fiscal year 2011 was $454,000, or $0.12 per diluted share, compared with net income of $3,000, or $0.00 per diluted share, a year earlier. The 5 year EPS growth rate is 105.75%. I also like the fact that total cash is almost six times more than its total debt, and ROE is 16.05%, which shows continued growth potential. Another reason I think HIHO is a buy at the current price is the fact that dividend yield is currently 13.85%, good for any portfolio.

Newcastle Investment Corp. (NCT) Operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. The current price is $4.23 with a 1 year price target of $9.5 (125% upside potential). NCT has an average 5-yr EPS growth rate of 34.85%, and a dividend yield of 14.35%. The company's gross profit margin has been higher than its Subsector average for each of the past five years, yet this stock is trading near its 52-week low of $3.56, making it a strong buy. NCT's current Forward PEG is 0.5, which shows a 70% discount compared to the mortgage REITs subsector average. Trailing P/E of 2.4x also shows a 70% discount compared to its peers. Uncertainty with the real estate market has pushed NCT very low, but fundamentally this company is very strong and has consistent growth making it oversold and under priced (hence the 125% upside potential not including the 14.35% dividend yield).

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

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here