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 dynamics 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. That said, here are three stocks under $50 to avoid and some other investments you should consider instead.
Macy's (M)
Share Price: $17.94
With a storied history that began with its 1858 founding, Macy’s (NYSE: M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Do We Steer Clear of M?
- Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Earnings per share have dipped by 20.7% annually over the past three years, which is concerning because stock prices follow EPS over the long term
Macy’s stock price of $17.94 implies a valuation ratio of 8.5x forward P/E. If you’re considering M for your portfolio, see our FREE research report to learn more.
Sinclair (SBGI)
Share Price: $13.27
With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ: SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.
Why Is SBGI Risky?
- Annual sales declines of 11.8% for the past five years show its products and services struggled to connect with the market during this cycle
- Eroding returns on capital suggest its historical profit centers are aging
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $13.27 per share, Sinclair trades at 20.3x forward P/E. Dive into our free research report to see why there are better opportunities than SBGI.
Tandem Diabetes (TNDM)
Share Price: $19.24
With technology that automatically adjusts insulin delivery based on continuous glucose monitoring data, Tandem Diabetes Care (NASDAQ: TNDM) develops and manufactures automated insulin delivery systems that help people with diabetes manage their blood glucose levels.
Why Should You Sell TNDM?
- Earnings per share fell by 18.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
Tandem Diabetes is trading at $19.24 per share, or 24x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TNDM in your portfolio.
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