Generally speaking, undervalued stocks under $5 should be avoided. Yeah, I know that’s not exactly the catchiest tagline to offer. Let me explain.
If you believe that the market represents the culmination at that moment of all available public information, then nothing really is under or overvalued. Securities are priced exactly where they should be given the information at hand. However, the thesis behind bargain ideas – particularly undervalued stocks under $5 – is that it’s practically impossible to know all things, all the time.
For example, Jim Cramer knows a lot about publicly traded enterprises but he doesn’t know them all. An army of Jim Cramers would not be able to cover every opportunity adequately. So, some promising ideas will be left on the sidelines, just waiting for an opportunity. That’s the allure (and the risk) behind these undervalued stocks under $5.
FuboTV (FUBO)
A live TV streaming platform sports, news and entertainment content, FuboTV (NYSE:FUBO) represents an intriguing idea for undervalued stocks under $5. Currently, shares trade hands for only 0.32X trailing-year revenue. That’s well off the sector’s median value of 1.25X. On that basis, FUBO stock seems like a steal. However, viability concerns have dogged the investment.
Since the start of the year, shares have lost 52% of equity value. Over the past five years, FUBO went into the red to the tune of over 80%. That’s an ugly print. Not surprisingly, analysts rate shares a consensus hold, with one of the ratings coming in as a sell. However ,the average price target stands at $2.88, implying almost 91% upside potential.
Here’s the deal. While Fubo struggles for credibility, in the past fiscal year, the average quarterly surprise landed at 22.8%. What’s more, experts anticipate that the current fiscal year’s top line will jump to $1.56 billion. That would be up 14% from last year’s tally of $1.37 billion. Thus, the lowly sales multiple seems very attractive.
Petco (WOOF)
Operating as a health and wellness company, Petco (NASDAQ:WOOF) focuses on enhancing the lives of pets, pet parents and its company partners. It covers the U.S., Mexico and Puerto Rico. Petco provides a variety of services, including veterinary care and grooming. However, WOOF stock has struggled, losing more than 41% of market value since the beginning of January.
At the same time, WOOF could be a risky contrarian opportunity for gamblers. Right now, shares trade at a subterranean sales multiple of 0.08X. Right off the bat, that sounds incredibly treacherous. There’s value and then there are value traps. Still, analysts peg WOOF stock as a consensus moderate buy with a $3.30 price target. That implies over 78% upside potential.
To be sure, Petco’s performance in the past four quarters have been all over the map. Sometimes it hits big, other times, it misses badly. And projections for the current fiscal year (2025) aren’t great, with revenue probably coming in at $6.13 billion. That’s 2% lower than last year’s haul of $6.26 billion.
Still, here’s the bullish thesis: the U.S. pet market is booming. And it’s possible that WOOF could ride coattails. If so, it could rank among the undervalued stocks under $5.
Broadwind (BWEN)
Operating under the specialty industrial machinery subcategory, Broadwind (NASDAQ:BWEN) manufactures and sells structures, equipment, and components for clean tech and other specialized applications primarily in the U.S. It operates through three segments: Heavy Fabrications, Gearing and Industrial Solutions. Notably, it offers significant relevancies for the manufacturing of wind turbines.
Despite the pertinence to the burgeoning renewable energy space, BWEN has struggled in the market. Since the start of the year, it’s down almost 13%. Over the past 52 weeks, the security slipped roughly 36%. Nevertheless, the good news is that shares now trade for only 0.25X trailing-year revenue.
In fairness, the discount in the sales multiple stems from analysts reduced expectations for the current fiscal year. They’re looking at sales of $150.26 million on average. Even at the high end of $165.3 million, it’s off from last year’s tally of $203.48 million.
However, a recovery could take place in fiscal 2025, with the high-side revenue reaching over $225 million. With shares appearing to stabilize since November last year, BWEN could be one of the undervalued stocks under $5 to consider.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
