The $10-50 price range often includes mid-sized businesses with proven track records and plenty of growth runway ahead. They also usually carry less risk than penny stocks, though they’re not immune to volatility as many lack the scale advantages of their larger peers.
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. Keeping that in mind, here are three stocks under $50 to avoid and some other investments you should consider instead.
Cars.com (CARS)
Share Price: $11.68
Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE: CARS) is a digital marketplace that connects new and used car buyers and sellers.
Why Is CARS Not Exciting?
- Dealer Customers have stagnated over the last two years, indicating its platform may be struggling to differentiate itself from competitors
- Key performance metrics have been flashing red recently as its average revenue per buyer dropped by 1% annually while engagement was weak
- Earnings growth underperformed the sector average over the last three years as its EPS grew by just 1.4% annually
Cars.com’s stock price of $11.68 implies a valuation ratio of 5.2x forward EV/EBITDA. Check out our free in-depth research report to learn more about why CARS doesn’t pass our bar.
Reynolds (REYN)
Share Price: $21.92
Best known for its aluminum foil, Reynolds (NASDAQ: REYN) is a household products company whose products focus on food storage, cooking, and waste.
Why Are We Out on REYN?
- Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Estimated sales decline of 1.2% for the next 12 months implies an even more challenging demand environment
- Gross margin of 25.4% is an output of its commoditized products
At $21.92 per share, Reynolds trades at 13.7x forward P/E. If you’re considering REYN for your portfolio, see our FREE research report to learn more.
Ally Financial (ALLY)
Share Price: $44.26
Born from the former GMAC (General Motors Acceptance Corporation) and rebranded in 2010, Ally Financial (NYSE: ALLY) operates a digital-first bank offering auto financing, insurance, mortgage lending, and investment services to consumers and commercial clients.
Why Should You Dump ALLY?
- Muted 2.7% annual revenue growth over the last two years shows its demand lagged behind its financials peers
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 4.8% annually
- 8× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Ally Financial is trading at $44.26 per share, or 7.8x forward P/E. Read our free research report to see why you should think twice about including ALLY in your portfolio.
High-Quality Stocks for All Market Conditions
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