4 Undervalued Stocks Under $5

04/18/2012 11:45 am EST

Focus: STOCKS

While low price doesn’t equate to low risk, the staff at Kapitall.com identifies four stocks are very affordable and appear undervalued using proven fundamental measures.

Do you prefer stocks trading at low prices per share? One thing to keep in mind is avoiding value traps, or stocks that appear to hold value but are trading at low stock prices for a reason.

We ran a screen with this idea in mind. We began with stocks trading under $5 per share and then screened for those that appear undervalued by two measures: Price-to-earnings growth (PEG) ratio and change in earnings estimates over the last month.

We first screened for stocks with PEG below 1. To substantiate this, we also screened for stocks with faster growth in earnings per share (EPS) than price over the last 30 days.

Based on the assumption that P/E is equal to a constant k, increases in EPS should be matched by increases in price. When they don’t match up, the stock may have more value to price…in other words, it might be undervalued.

Keep in mind that inexpensive doesn’t mean low risk. Low-priced stocks are low-priced for a reason, and although they may be undervalued according to calculations, they can and will move lower. Use good risk management even with stocks under five dollars.

The McClatchy Company (MNI) operates as a newspaper publisher in the United States. It has a market cap of $237.50 million. The EPS estimate for the company’s current year increased from $0.47 to $0.52 over the last 30 days, an increase of 10.64%. This increase came during a time when the stock price changed by -2.16% (from $2.78 to $2.72).

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Navios Maritime Holdings Inc. (NM) operates as a seaborne shipping and logistics company in Greece. It has a market cap of $392.23 million. The EPS estimate for the company’s current year increased from $0.48 to $0.49 over the last 30 days, an increase of 2.08%. This increase came during a time when the stock price changed by -1.97% (from $4.07 to $3.99).

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NEXT: 2 Other Value Plays Under $5

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LIN TV Corp. (TVL) operates as a local television and digital media company that owns, operates, and services 32 television stations and interactive television station and niche Web sites in 17 US markets. It has a market cap of $215.78 million. The EPS estimate for the company’s current year increased from $0.86 to $0.87 over the last 30 days, an increase of 1.16%. This increase came during a time when the stock price changed by -1.71% (from $4.09 to $4.02).

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China Xiniya Fashion Limited (XNY) engages in the design and manufacture of men’s business casual and business formal apparel and accessories. It has a market cap of $100.34 million. The EPS estimate for the company’s current year increased from $0.55 to $0.59 over the last 30 days, an increase of 7.27%. This increase came during a time when the stock price changed by -5.% (from $1.80 to $1.71).

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By the Staff at Kapitall.com

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