The Dow, S&P 500, and Nasdaq all touched new highs Friday and jumped again Monday morning as we head into Christmas and inch closer to 2020. The stock market could keep rolling next year as we have a tentative phase one trade deal between the U.S. and China and some better-than-projected economic indicators from both of the world’s largest economies.
Earnings growth is also expected to return in 2020. Plus, the Fed is projected to keep interest rates low, as U.S. unemployment rests at historic lows. With this in mind, now seems like a good time to add a few “cheap” stocks to your portfolio (also read: Why Stocks Are Poised To Soar In 2020).
Here at Zacks, we try to avoid labeling stocks as “expensive” or “cheap.” Instead, we look far beyond face value, and our system puts an emphasis on earnings estimate revisions to find stocks that will hopefully be winners for investors.
Lower-priced stocks can be more volatile than stocks trading at higher prices. Nonetheless, stocks that trade for $20 or less can still be attractive. So let’s dive into five strong stocks currently trading for under $20 per share we found with our Zacks Stock Screener that investors might want to buy for 2020…
Box, Inc. (BOX - Free Report)
Prior Close: $17.53 USD
Box is a cloud-software firm that works with roughly 70% of the Fortune 500. Last quarter, the company launched new offerings and rolled out “deeper integrations” with Slack (WORK - Free Report) , IBM (IBM - Free Report) , and Microsoft Teams (MSFT - Free Report) . Shares of box are up 25% in the last three years but have been volatile and they are down 4% in the past six months, which does give the stock room to climb. Along with its actual price, BOX shares are trading at 3.5X 12-month forward sales estimates. This marks a discount against its industry’s 6.2X and its own three-year median of 4.3X.
Our Zacks estimates call for Box’s current-year (fiscal 2020) sales to jump 14% to $694.2 million, with 2021 expected to come in another 11% higher to reach $770.9 million. This would mark a slowdown compared to where it has been, but its earnings growth might help Wall Street dive back into Box stock. The company is projected to post positive adjusted fiscal 2020 earnings of +$0.01 after reporting a loss of -$0.12 per share last year. Better yet, Box’s 2021 EPS figure is projected to skyrocket to +$0.30 per share and its longer-term positive earnings revisions activity helps BOX earn a Zacks Rank #2 (Buy). Box also holds an “A” grade for Growth in our Style Scores system.
Vipshop Holdings Limited (VIPS - Free Report)
Prior Close: $14.46 USD
Vipshop is a Guangzhou, China-based discount e-commerce retailer, with a roughly $10 billion market cap, that saw its active customer base jump 21% during the third quarter to reach 32 million. The firm’s gross profit popped 16.6% from the prior-year period, while gross merchandise volume climbed 17%. Vipshop also crushed our earnings estimates by roughly 40% in the trailing two quarters. The company’s solid expansion as part of the global rise of e-commerce helped VIPS stock soar 176% over the last year and 20% in the last month alone.
Despite this climb, Vipshop shares still have plenty of room to run before they reach their 2015 highs of nearly $30 per share. VIPS stock is also trading at a significant discount compared to its industry in terms of forward earnings (14.1X vs. 29.4X), which also comes in well below its own three-year high of 32X. Vipshop’s fiscal 2019 earnings are projected to soar 64% and another 27.4% in 2020 on 8% stronger sales. VIPS’s fiscal 2019 and 2020 consensus earnings estimates have surged recently to help it land a Zacks Rank #2 (Buy). VIPS also rocks an “A” grade for Value and a “B” for Growth.
Pure Storage, Inc. (PSTG - Free Report)
Prior Close: $16.90 USD
Pure Storage is an enterprise data storage and solutions firm that holds a Zacks Rank #2 (Buy) right now, based on some of its positive earnings revision activity. The company also crushed our bottom-line estimates by 44% and 125%, respectively, the past two periods and boasts an “A” grade for Growth to help it hold an overall “B” VGM score. PSTG shares did fall after its November earnings release and rest below both their 50 and 200-day moving averages. But investors should note that PSTG stock has bounced back over the last two weeks.
Looking ahead, the Mountain View, California-based tech company’s full-year fiscal 2020 revenue is projected to pop roughly 21%, with 2021 expected to come in 19.2% higher at $1.96 billion. PSTG’s adjusted fiscal 2020 earnings are projected to surge 19% to $0.25 per share, with 2021 expected to climb nearly 70% above our current-year estimate to touch $0.42. PSTG is also part of a larger growth industry within tech and is trading at a discount compared to its industry in terms of forward sales.
MFA Financial, Inc. (MFA - Free Report)
Prior Close: $7.91 USD
MFA Financial is a real estate investment trust mostly engaged in investing, on a leveraged basis, in residential mortgage assets such as mortgage-backed securities. The REIT is coming off back-to-back bottom line beats and MFA stock has climbed 18% in 2019 and 10% in the last six months. Looking ahead, our current Zacks estimates call for MFA’s full-year sales to jump 7.3% and 7.2%, respectively, in fiscal 2019 and 2020. Meanwhile, its adjusted earnings are projected to pop 13.2% and 6.5% during this same stretch.
MFA is a Zacks Rank #2 (Buy) right now, based on its longer-term earnings revision trends. The stock is also trading at 9.6X 12-months Zacks earnings estimates. This represents a discount against its own three median and its industry’s 16.5X average. Most importantly, MFA Financial’s dividend currently yields an impressive 10.2%, which isn’t artificially inflated since the stock is up 20% in 2019.
Cronos Group Inc. (CRON - Free Report)
Prior Close: $7.00 USD
Cronos Group is the only stock on our list today that isn’t a Zacks Rank #2, as it holds a #3 (Hold). We added CRON to this list of strong stocks under $20 as a bet on marijuana stocks regaining momentum in 2020. Our Zacks Marijuana Innovators analyst David Borun recently dove into why he is nearly positive that the heavily-shorted pot stocks will bounce back at some point in 2020 after a dismal 2019. Cronos stock has fallen over 56% in the last six months, alongside Aurora Cannabis (ACB - Free Report) , Tilray (TLRY - Free Report) , and Canopy Growth (CGC - Free Report) .
With that said, marijuana has only been fully recreational legal in Canada for just over a year and “Cannabis 2.0,” which includes derivatives such as edibles and concentrates, is even newer. Plus, marijuana is now recreationally legal in 11 states and D.C., with more to come. Therefore, the market truly only has room to grow. Cronos’ fiscal 2019 sales are projected to jump nearly 200% to $35.8 million, with 2020 expected to soar 280% higher to hit $135.7 million. And the firm’s losses appear as though they will remain small even as the Canadian marijuana company expands.
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