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Stocks Under $10 That Have Winning Factors

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Low-priced stocks may not seem attractive to some because fewer people follow them and less has been said about them. So there’s insecurity about not knowing enough. So here, I’ve pulled out some winning factors in these low-priced stocks that might make you want to try your luck. Remember that with the Zacks ranking system behind you, there’s a very good chance that you will win with these. Check out the details-

Universal Technical Institute Inc (UTI - Free Report)

Universal Technical Institute provides technician training and education in automotive, diesel, collision repair and refinishing, motorcycle, marine and personal watercraft technologies.

As far as programs are concerned, the company has seen increased demand for welding programs and plans to extend these from the current three to six by fiscal 2021. The core automotive program was also expanded to include Volvo car’s advanced and electrified vehicles and technology.

The company recently reshuffled its senior leadership team across corporate strategy, IT, and legal departments to set it up to fuel growth in the changed operating environment.

Winning factor: possible operational efficiencies revealed by the pandemic.

Its increased efficiencies from conducting online classroom sessions during the lockdown are likely to be continued in the future. Management expects cost efficiencies from this as a significantly larger number of students can be addressed by a single teacher than would have been possible in the classroom model. Lab sessions will of course have to be conducted on physical premises, but the added flexibility is expected to yield efficiencies.

The other area of efficiency is likely to come from marketing, where the diversion of $2 million from TV to social media yielded positive results.   

Most of the COVID impact is expected to be realized in the next quarter. But increased efficiencies are expected to be positive overall.

As a result, its 2020 EPS is expected to be up 167.3% on revenue that’s expected to grow just 1.3%. In 2021, earnings will grow 60.0% on revenue growth of 10.0%.

Zacks Rank #2

Value Score A

Growth Score A

VGM Score A

Industry: - Schools Top 25% (62 out of 252)

2020 (ending September) EPS up 21 cents in last 60 days

2021 EPS up 19 cents in the last 60 days

Valuation: On the basis of price to forward 12 months’ earnings, the shares are trading at the low end of their range over the last 6 months, whereas the S&P 500 is trading at the high end of its 6-month range. So the shares appear undervalued.

Great Lakes Dredge Dock Corporation (GLDD - Free Report)

Great Lakes is the largest provider of dredging services in the U.S. As the name indicates, it maintains and deepens shipping channels, reclaims land from the ocean; and renourishes storm damaged coastlines. Around 25% of its operations are international, particularly in the Middle East. Projects are generally classified as Maintenance Projects that keep shipping channels and harbors at their required depths; Capital Works that excavate, deepen or widen navigable waterways; Beach Restoration that restores storm damaged coastlines and Reclamation works to restore wetlands or create new land in the ocean.

Winning factor: This is a federally-designated “Critical Infrastructure” company, meaning that it continued operations right through the pandemic and will continue operating through the rest of the year as well. That’s because this type of infrastructure work is related to keeping coastlines safe when the storm season hits or facilitating movement of vessels (including oil and LNG tankers) and keeping inland waterways functional. (None of the company’s employees were impacted by COVID with official workers working from home and others operating in accordance with the CDC’s safety guidelines. As a result, projects have proceeded as planned.)

Winning Factor 2: The U.S. Army Corps of Engineers, which oversees the majority of these infrastructure projects, continues to advertise new projects including for port maintenance and expansion, and coastal protection. While new competition is entering the space, management appears confident about there being sufficient demand. It is therefore bringing back a retooled vessel to the U.S. to service this demand. Management said that the 2020 bid market would be similar to 2019 levels, 2020 revenues would be higher than 2019 and the gross profit margin would be approximately at the same level. Any private client jobs would be incremental to this.

As a result, its 2020 EPS is expected to be up 23.3% on revenue that’s expected to grow just 3.8%.

Zacks Rank #1

Value Score A

Growth Score A

VGM Score A

Industry: Building Products - Heavy Construction Top 38% (95 out of 252)

2020 EPS up 20 cents in last 60 days

Orion Group Holdings, Inc. (ORN - Free Report)

Orion Group Holdings is a construction company providing services on and off the water primarily in the continental United States, Alaska, Canada and the Caribbean Basin. Its two operating segments are Heavy Civil Marine Construction and Commercial Concrete. Heavy civil marine construction segment services includes marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design and specialty services. Commercial concrete segment provides turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar and mesh across the light commercial, structural and other associated business areas.

Winning factor: This is a federally-designated “Critical Infrastructure” company, meaning that it continued operations right through the pandemic and will continue operating through the rest of the year as well.

Winning Factor 2: The company continues to see orders flow in. Its book-to-bill was around 1.2X, which also helped build backlog in the last-reported quarter. While there is a certain amount of uncertainty related to third- and fourth-quarter demand, which is why full-year visibility is low, management assured that it is well diversified by market and that its end markets are typically resilient to disruption.

So revenue is expected to be flattish this year with respect to 2020 and rise 8.6% in 2021. Earnings are expected to go from 0 to 22 cents in 2020 and then up to 32 cents the following year.

Zacks Rank #2

Value Score A

Growth Score A

VGM Score A

Industry: Building Products - Heavy Construction Top 38% (95 out of 252)

2020 EPS up 2 cents in last 60 days

Frontline Ltd. (FRO - Free Report)

Frontline is a shipping company engaged in the seaborne transportation of crude oil and oil products worldwide. Other than owning and operating its fleet of 71 oil and product tankers, it charters, purchases and sells vessels.

Winning Factor: The load-to-dispatch spot rates have been very favorable in the first quarter of the year because of the plunge in oil prices that led a number of countries to build inventories, both on land and water. This was an unusual situation that isn’t expected to repeat (spot rates usually fall with an economic slowdown, as was the case during the global lockdown). But with several markets rushing to build inventory and demand from China and then India picking up pretty quickly thereafter, spot rates held up. While they typically vary depending on a number of factors including total shipping capacity available and the amount of oil to be transported, current rates indicate healthy cash flow for the company in 2020.

Winning Factor 2: CEO Robert Macleod said on the earnings call, “Frontline enjoys the youngest fleet and lowest breakeven level in the history of the company.” With the global fleet capacity slowing down, 24% of very large crude carriers (VLCC) being more than 15 years old and a number of vessels scheduled for dry docking (so they won’t be operational), demand in the next year or so will depend on the rate at which current inventories are used. Frontline’s younger fleet is likely to be in greater demand. Utilization also benefits from floating storage, which offsets some of the softness in demand.

There are only two analysts offering estimates for 2020 and 2021, the lower of which expects a 40.2% increase in earnings this year, followed by a 7.8% increase in the next. The high estimate assumes a 328.0% increase this year followed by a 39.0% decline in the next. The average comes to a 184.2% increase in 2020 followed by a 27.5% decline in 2021.

While that might come across as somewhat risky, remember the winning points, the fact that the stock has a beta (measuring volatility over a 5-year period compared to the S&P 500) of 0.46, a manageable debt level (debt/cap of 52%) and a price to free cash flow (P/FCF) of 7.0X, close to its six-month low and much lower than the 21.8X for the S&P 500. It also has a Zacks Rank #1, Value Score A, Growth Score A and consequently, a VGM Score A.

 

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