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.

This is precisely where StockStory comes in - we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. Keeping that in mind, here are three stocks under $50 to avoid and some other investments you should consider instead.

Zuora (ZUO)

Share Price: $10.11

Founded in 2007, Zuora (NYSE: ZUO) offers software as a service platform that allows companies to bill and accept payments for recurring subscription products.

Why Do We Think ZUO Will Underperform?

1. Annual revenue growth of 11.3% over the last three years was below our standards for the software sector
2. Flat billings over the last year suggest it may need to improve its products, pricing, or go-to-market strategy to reinvigorate demand
3. Gross margin of 69.8% reflects its relatively high servicing costs

Zuora’s stock price of $10.11 implies a valuation ratio of 3.4x trailing 12-month price-to-sales. To fully understand why you should be careful with ZUO, check out our full research report (it’s free).

Zurn Elkay (ZWS)

Share Price: $34.03

Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE: ZWS) provides water management solutions to various industries.

Why Does ZWS Fall Short?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 8.3% annually, worse than its revenue
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Zurn Elkay is trading at $34.03 per share, or 25.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why ZWS doesn’t pass our bar.

Kennametal (KMT)

Share Price: $21.31

Involved in manufacturing hard tips of anti-tank projectiles in World War II, Kennametal (NYSE: KMT) is a provider of industrial materials and tools for various sectors.

Why Should You Dump KMT?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Forecasted revenue decline of 2% for the upcoming 12 months implies demand will fall off a cliff
3. Earnings per share have dipped by 7.4% annually over the past five years, which is concerning because stock prices follow EPS over the long term

At $21.31 per share, Kennametal trades at 13.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than KMT.

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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.