Stocks in the $10-50 range offer a sweet spot between affordability and stability as they’re typically more established than penny stocks. But their headline prices don’t guarantee quality, and investors should exercise caution as some have shaky business models.
These dynamic can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three stocks under $50 to avoid and some other investments you should consider instead.
Portillo's (PTLO)
Share Price: $13.32
Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ: PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.
Why Are We Wary of PTLO?
- Smaller revenue base of $710.6 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Poor free cash flow margin of -0.5% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Portillo’s stock price of $13.32 implies a valuation ratio of 41.8x forward price-to-earnings. If you’re considering PTLO for your portfolio, see our FREE research report to learn more.
Simply Good Foods (SMPL)
Share Price: $35.01
Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.
Why Are We Cautious About SMPL?
- Smaller revenue base of $1.36 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Free cash flow margin dropped by 1.6 percentage points over the last year, implying the company became more capital intensive as competition picked up
- Underwhelming 7.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
Simply Good Foods is trading at $35.01 per share, or 18.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than SMPL.
Allient (ALNT)
Share Price: $23.34
Founded in 1962, Allient (NASDAQ: ALNT) develops and manufactures precision and specialty-controlled motion components and systems.
Why Do We Avoid ALNT?
- 2.6% annual revenue growth over the last two years was slower than its industrials peers
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share were flat while its revenue grew
At $23.34 per share, Allient trades at 12.8x forward price-to-earnings. To fully understand why you should be careful with ALNT, check out our full research report (it’s free).
Stocks We Like More
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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
